Unconscionable Contracts and Creative Professionals

The rise of the gig economy has amplified the issue of unconscionable contracts for independent contractors. While New York's "Freelance Isn't Free Act" protects payment, it doesn't always address exploitative contract clauses. Many creators sign agreements without fully understanding the long-term implications for their creative rights and earning potential. This vulnerability often stems from the pressure to secure work quickly, leading them to overlook red flags in contracts presented on a 'take-it-or-leave-it' basis.

A contract is unconscionable in New York if it involves both procedural and substantive issues. Procedural unconscionability relates to a flawed negotiation process, like high-pressure tactics or unequal bargaining power. An example of a procedural flaw would be rushing a creator to sign a lengthy document without adequate time to consult legal counsel. Substantive unconscionability refers to the unfairness of the terms themselves, such as grossly inflated fees or imbalanced obligations. For a successful claim, New York courts typically require evidence of both aspects.

A frequent issue is disproportionate revenue sharing. Contracts with Multi-Channel Networks (MCNs) or agencies may promise a certain split but define revenue in a way that allows for exorbitant fee deductions. These deductions can include opaque 'management,' 'marketing,' or 'administrative' fees that are not clearly itemized, effectively obscuring the true earnings. This can result in creators receiving only a tiny fraction of the profits they generate. Therefore, a contract that does not provide a crystal-clear and transparent breakdown of all potential deductions should be treated with extreme caution.

Intellectual property is a creator's core asset. However, unconscionable contracts often include "work-for-hire" clauses that assign all rights to the company. This is highly disadvantageous, preventing the creator from monetizing their own work after the contract ends. Losing this control can have devastating long-term consequences, erasing a creator's ability to build a brand or legacy from their work. A more equitable alternative is a licensing agreement, where the creator retains ownership of their IP and grants the company specific, limited rights for a defined period.

Work-for-Hire Language

• The Parties agree that all Works created hereunder shall be considered 'works made for hire' as defined by the U.S. Copyright Act of 1976.
• Creator agrees to assign to Company all copyrights and intellectual property rights in and to the Work, including all proceeds thereof.
• Company shall own all rights, title, and interest in and to the Work... .n perpetuity throughout the universe.

Some contracts grant a company excessive power to unilaterally change terms or transfer the agreement without the creator's consent, exposing the professional to unfavorable conditions with little recourse. Such clauses are a clear sign of an unconscionable contract. For instance, a company could alter payment schedules or content requirements at will, forcing the creator to comply or risk a breach of contract.

Prior to signing, every clause must be thoroughly reviewed, particularly those concerning revenue, ownership, and termination. It is crucial to negotiate for clear language and never feel pressured to sign on the spot. Requesting time to consult with an attorney is a reasonable step that a legitimate partner will respect. An experienced entertainment lawyer can identify potentially harmful clauses that a non-professional might easily overlook, providing crucial leverage during negotiations. The following terms are often subject to negotiation:

Financial Terms

• Revenue calculation method (gross vs. .et)
• Percentage of revenue split
• Expense deduction limits

Intellectual Property Rights

• Creator retains copyright with a limited license
• Grant a license only for specific use cases
• Clear ownership of social media accounts

Termination & Assignment

• Termination clauses that are not overly restrictive
• Right to refuse assignment to a third party
• Reasonable penalty clauses for early termination

If you have already signed an unconscionable contract, it is wise to seek legal counsel. A skilled attorney can evaluate the viability of a claim based on unconscionability and negotiate for a more favorable settlement or contract revision. While the contract may stipulate alternative dispute resolution like mediation, legal expertise is still necessary to navigate the complex interplay of contract and intellectual property laws in New York. Ultimately, understanding your rights before a dispute arises is the most powerful position a creative professional can have.