Checklist of Legal Items to Check When Drafting Contracts for Foreign Freelancers

Law firm Veat reviewed the service contract issues to be concluded with American freelancers upon the request of an artificial intelligence software development company (hereinafter referred to as "customer").

The customer intended to conclude a service contract in the form of a freelancer with an American technical expert, and Law firm Veat advised in detail on the legal requirements to conclude a service contract with a foreigner, and points to be careful so that the contract would not be interpreted as an employment contract.

Points for Setting Contract Structure when Utilizing Overseas Personnel

• Employment Contract

If a service contract is deemed a de facto employment contract, the Labor Standards Act may apply, and the employer’s legal obligations such as four major insurances may arise. Therefore, the contract should carefully note elements related to performance, such as work instructions and supervision, place and time of work, and the authority to terminate the contract, and clearly state the method of performing independent work from the purpose of the contract.

• Tax Treaty

Also, when paying service fees to an American freelancer, it is necessary to consider the taxability according to tax law. Especially in cases like this, where the service provider is a U.S. national, an exception may apply where the human service is performed entirely within the U.S., allowing for non-withholding of taxes under the Korea-U.S. tax treaty.

Therefore, Law firm Veat designed the contract structure to minimize tax legal risks, focusing on whether the freelancer’s place of work is actually in the U.S., and whether it can be clearly stated and substantiated on the contract.

Furthermore, to avoid suspicion of tax avoidance purposes, we supported the preparation of transparent contract clauses and a verifiable data system for the scope of work and method of performance.

• Intellectual Property Protection Clause

Given the customer’s business characteristics, source code, algorithms, and learning data that the freelancer accesses or creates are all unique technological assets that require legal protection. Law firm Veat recommended including a clause clearly defining the assignment of intellectual property rights and the right to use the results in the freelancer contract, and a provision restricting secondary works and commercial reuse.

In addition, in order to prevent leakage of technology and business information, we included a strong Non-Disclosure Agreement (NDA) clause and established a practical system for protecting rights by clearly defining jurisdiction and governing law in preparation for potential disputes.

In particular, we helped to prepare the jurisdiction clause and dispute resolution method when collaborating with overseas personnel.

Consulting Strategy of IT-Specialized Law firm Veat for Technology Company’s Global Contracts

With the growth of technology-centric companies such as AI, SaaS, and blockchain, collaboration with overseas specialists has become more active. However, if you start work only with standard form contracts or email confirmations without prior review by legal professionals, you may face various legal issues such as unexpected tax risks, right disputes, and information leakage.

Law firm Veat, based on our integrated consulting capabilities encompassing IT, intellectual property, tax treaties, and labor & employment contract fields, is providing integrated advice on service contract design, intellectual property and NDA system construction, and review of tax treaties suitable for technology companies' global collaboration structure.

In particular, we support the systematic inclusion of provisions such as contract structure design, adjustment of intellectual property rights for AI software development results, NDA for protection of confidential information, provisions to prevent technology leakage, and provisions for jurisdiction and governing law to prepare for international disputes.

If you need a review of English service contracts or advice on contract structure for utilizing overseas personnel, please feel free to contact Law firm Veat.

This case study can also be found on the Law firm Veat blog below.

- Legal Checklist to Confirm When Drafting a Freelancer Contract with Foreigners

Thank you.

Law firm Veat