Top Seven Legal Risks For Consultants—And How To Avoid Them

By Patricia S. Eyres, May 12, 2005

From unauthorized use of music and graphics to offensive content in presentations to contractual disputes, there are legal land mines out there that you don’t want to step on as a professional consultant. Some basic awareness coupled with consistent procedures can save both anxiety and expense. At a minimum, you should know the steps you must take to license copyrighted materials and protect your own proprietary rights. When you speak to business groups in their work environments, be aware of their employees’ rights to equal employment opportunities, and how your talk may impact those rights. Most significantly, take appropriate proactive steps to be sure your fee agreement hold up in court if your client later claims you didn’t deliver what you promised.

Failing to honor contractual commitments or misrepresentations about qualifications to perform.

Consultants may breach contractual obligations in a number of ways, including failing to produce the required deliverables or breaches of a confidentiality agreement. In addition, when the client requires the consultant to represent that she owns the right to use specific tools or instruments—such as tests or performance aids—any violation of copyright law may also lead to breach of contract, particularly when the client is also sued for infringement.

The best way to avoid breaches of contract is to make realistic commitments and to proactively manage your performance of contractual commitments. If you promise a rapid turnaround of work product, plan for foreseeable contingencies that may interfere with performance. Address these issues at the outset. Then, if unforeseen circumstances occur, contact the client immediately to discuss reasonable modification of your contractual commitment based on the changed circumstances. Unfortunately, the most frequent source of contractual disputes involves failure to meet commitments in a timely manner. Often open communication will alert the client to the reasons for any delays and avoid misplaced expectations.

Finally, you risk legal exposure when you exaggerate your experience in a particular industry or subject area. While aggressive “marketing spin” may result only in damaged credibility, outright misrepresentations about education, specific certifications or experience can lead to breach of contract and in extreme cases fraud claims. At best, such representations to clients can tarnish your reputation when you can’t meet their expectations. At worst, they can lead to legal action for return of fees or damages based on the client’s detrimental reliance on your representations.

Failure to protect your rights through negotiation and enforcement of effective contracts.

Meeting contractual commitments is a sound business practice. It is equally important for consultants to enforce your own contracts. A common legal problem is the inability to quickly and effectively collect fees and enforce clients’ promises. Professional consultants should be prepared to pursue appropriate legal action to enforce your contracts. This requires negotiating and memorializing enforceable agreements, so the contract will hold up in court. There is no substitute for addressing specifically allocating responsibilities for timing, deliverables and reasonably foreseeable contingencies and build them into your contract.

Negligent advice or instructions that causes business harm to a client.

Consultants provide advice on a wide range of topics, including skills, which are essential for your clients’ business practices. Clients rely on you to render advice or provide information on essential business issues, such as development of test instruments, initiation of team building, diversity or organizational development issues or other human performance interventions. Your client’s legal and regulatory compliance may be affected, so that reliance on inaccurate advice may result in significant liabilities.

Likewise, if you present skills-based training programs on using technology, managing diversity, financial management, safe work practices or other core business issues, you must provide both appropriate content and methodology to assure that your client’s employees apply the information as intended. When your client’s employees make mistakes based on information you provide, you may be sued for subsequent business losses.

Negligence lawsuits against consultants run the gamut from personal injury claims (such as participants injured during a program facilitated by a consultant), to breaches of professional standards for accountants (a form of “malpractice”) to claims for indemnification by a client who is sued due to the consultant’s advice on how to design and deliver safety training.

Discriminatory training materials and curriculum on client projects or programs.

External consultants are often held by the courts to the same standards as their clients’ training staff. Just as internal trainers who design curriculum may generate liability for harm to employees if the methodology doesn’t meet appropriate standards or the content is discriminatory, so too can the external trainer. While negligent curriculum design will result only in liability for the sponsoring organization—the employer or client—discrimination in content or delivery may create personal exposure as well.

In order to prevent legal exposure for discrimination, consultants should be well versed on the various forms of discrimi­nation and take proactive steps to avoid inappropriate methodology. While most consultants are not in a position to provide legal advice—and should never attempt to do so—you can provide appropriate direction to clients who may be in danger of violating regulatory standards or other legal responsibilities in the discrimination arena.

Copyright infringement by incorporating protected work into reports and materials without permission.

Consultants frequently create and distribute written materials in the form of handouts, articles, outlines or graphic presentations. Use of materials owned by another person, without permission or a license agreement, can result in legal action by the copyright holder. Such action may be brought against the consultant and the client for whom the materials are used.

Ineffective protection of your own work product and proprietary interests.

As a professional consultant, you invest significant time and resources developing speeches, handouts and audio visual or graphic materials to enhance your presentations. In addition, you develop and market workbooks, instruments and other products, including audio and videotapes. These materials are proprietary and have substantial value. Yet, many consultants don’t take the time to protect their own work product from infringement or misappropriation. When you learn that a unique exercise or technique has been used—verbatim or in significant detail—by someone else, you may not be positioned to enforce these rights and obtain redress for losses caused by the misappropriation.

• Know Your Rights Understand which of your products and materials are subject to protection under the Copyright Act and any relevant state laws. Your rights include reproduction, distribution, display and public performance rights, as well as the right to create derivative works.

• Preserve Your Rights Take the steps to reserve and enforce copyright protection. This includes placing appropriate copyright notices on all written materials and audio visual aids you will reproduce, distribute, display or publicly perform. Take the steps to register those products and materials that, if used by others, would impair your business and for which you wish to preserve the right to sue for infringement.

• Be Prepared to Respond to Requests to Use Your Work When you preserve your copyrights, you should be prepared when someone asks for permission to use, display or perform the work. If you don’t want others using your work, politely decline. Be prepared to define the limits of authorization you are willing to provide to those who request negotiate effective license agreements for handouts, unique presentation products and related materials. Consider, in advance, the parameters of any license agreements you will sign for use of your materials. This will facilitate easier negotiations, and reduce the risk that your pleasure at someone’s interest in using your work will interfere with your thorough analysis of the financial dimensions of the arrangement.

Ineffective or non-existent documentation.

Documentation is a written record of an event, discussion or observation by one or more individuals. Most organizations rely on documentation to record their activities and those of their employees. Any written information, whether formally or informally generated, can be considered documentary evidence if it is pertinent to an administrative proceeding or lawsuit.

When called upon to defend against a legal claim—copyright violation, discriminatory content, negligence or professional errors, breach of contract—consultants must be able to provide credible information to reconstruct events, to explain what occurred or to substantiate their efforts to comply with applicable legal requirements. Haphazard record keeping, ambiguous commitments, or incomplete agreements are both frustrating and potentially devastating to the successful position in a legal dispute.