Kill-fee policies provide additional security in volatile industries; however, unlike contract damages, they are not required by law. To be legally enforceable, they need to be mutually agreed upon in a written document.
Freelancers and the self-employed without kill-fees were hit hard by the first wave of shut-downs. According to experienced attorney Becca Brennen, the potential for sudden cancellations always exists in the entertainment industry and especially while Covid is still a factor. However, she also claims that it is never too late to draft your own contract to protect yourself in the future. Additionally, you’ll never have to wonder again whether or not you’re entitled to compensation when months of expected income are lost overnight.
What is a kill-fee?
A kill fee is a fee for cancellation of a booked job. It reflects work turned down, and income lost as a result of your commitment to the project. It is normally a sliding scale based on the timing of the termination. According to Becca Brennen, a deal memo is not a proper substitute for a kill-fee and must specify both the cancellation fee and minimum payment amounts.
You will not be protected without a written agreement and, more often than not, any written terms protecting your interest needs to be provided by you. A good kill-fee provision will include a schedule of fees (usually a % of the total expected value), as well payment terms and late penalties for these fees, just as you would provide as part your normal rate schedule or bid.
Work with an attorney
You’re in the best position to know what would be fair in the event of termination, but ideally you should work with an attorney who can help craft language that reflects your ideal terms. This doesn’t have to be a significant or on-going investment.
A good attorney will help you make money. And someone who specializes in these types of contracts should be able to help you draw up a contract and walk you through it efficiently so you won’t be billed beyond a couple of hours for a one-time basis. The beauty of a properly crafted legal template is that it can be easily tailored on a project-by-project or client-by-client basis Important to also include.
Drawing up an agreement
When drawing up your own agreement, keep in mind that a good contract is fair and equitable for both parties. Becca Brennen finds that people are more comfortable presenting contracts to their clients when they know the terms they’re requesting and can confidently defend their terms or negotiate if need be.
She suggests individuals have contracts of their own; however, this doesn’t mean that they need to enforce it or present it to every client for every project. She claims that how you use it depends on a case-by-case risk analysis based on a number of factors including your relationship with the client and the value of the job in terms of expected income.
“It’s unfortunate but understandable that many freelancers, even those with years of experience under their belt, are worried that any suggestion of formality will spook a client and burn bridges both near and far. In an industry that is largely based on word of mouth, your reputation precedes you. I wish everyone could understand that transparency up front is appreciated and will help all parties involved in the long run. However, the reality is that, where uneven power dynamics are at play, this just isn’t the case. This is why, when I am faced with push-back or sense uneasiness about drafting a contract, I clarify the distinction between creating your own policies and actually presenting them and enforcing them.”
It is entirely possible to create a precedent without enforcing it immediately. It may even help your position by presenting your standard terms immediately but offering to waive them for a specific project or time period. This shows professionalism and flexibility while also allowing you to gain leverage as your value is proven.
You can even use the situation to ensure future work by offering to credit your kill fees towards future projects. This not only mitigates current loss, but also shows goodwill towards the client. You can also offer to reduce or waive your kill fee in exchange for right of first refusal on the client’s future projects within a finite time period.
“Of course, you may assess the situation and decide that it’s not worth it; that the relationship is too new or potential loss is not great enough. But now that you know what your ideal agreement looks like, you’re in a better position to critically review any contract presented to you by a client and raise any concerns with a clear view of more preferable alternatives. If a client’s deal memo refers to cancellation fees or minimum payments, but doesn’t specify them, this is the perfect opportunity to present your terms. You’re not only protecting yourself, but now you’re helping to tighten up their agreement.”
The bottom line
In short, draft your own contract and kill fee terms. How you use it depends on the situation and involves a risk-analysis and balancing act, but even just knowing what protection looks like may help your position and mitigate the financial impact in these volatile times.