Avoiding Legal Pitfalls for Your Agency with Sharon Toerek
Key Takeaways
- Tie the transfer of work ownership to payment completion so clients must settle invoices before gaining full rights to the deliverables
- Limit your agency's liability to variables you can actually control - do not accept indemnification clauses for outcomes outside your scope
- Secure portfolio display rights in your initial contract so you can showcase work without needing repeated client approvals
- Establish strong independent contractor agreements with every freelancer and vendor to protect your agency's legal position
- Revenue-sharing relationships require clear legal documentation that defines ownership, responsibilities, and exit terms upfront
- Review and update your standard contracts at least annually as the legal landscape for digital agencies evolves quickly
Gray MacKenzie welcomes Sharon Toerek, founder of Toerek Law, to discuss the legal pitfalls that digital agencies encounter most frequently. Based in Cleveland, Ohio, Sharon specializes in intellectual property and marketing law for agencies and creative firms. She also hosts The Innovative Agency podcast, where she covers the legal and business issues that agency leaders face.
Ownership Rights to Client Work
The question of who owns the work an agency produces is one of the most common - and most misunderstood - legal issues in the agency world. Sharon clarifies that in most cases, clients do ultimately own the work produced on their behalf. However, the critical detail is the timing and conditions of that ownership transfer.
Sharon’s primary recommendation is to structure contracts so that ownership of deliverables transfers to the client only upon full payment. This creates a natural incentive for clients to pay on time and gives the agency leverage if payment disputes arise. Without this language, an agency can find itself in the frustrating position of having delivered work, not been paid, and having no legal claim to withhold the deliverables.
The specifics matter here. Sharon emphasizes that the ownership clause needs to be explicit about what triggers the transfer - not just “upon completion” but “upon receipt of full payment.” This one contractual detail can save agencies from significant financial exposure.
Liability and Indemnification
Agency contracts often contain liability and indemnification clauses that agency leaders sign without fully understanding the implications. Sharon explains that agencies should be responsible for the quality and accuracy of their work, but they should not be placed in a legally liable position for variables they cannot control.
For example, if an agency builds a website and the client later installs a plugin that breaks functionality or creates a security vulnerability, the agency should not bear liability for that outcome. Similarly, if a client provides inaccurate information that the agency uses in marketing materials, the liability should rest with the party that provided the information.
Sharon advises agency leaders to review indemnification clauses carefully and push back on language that creates open-ended liability. The goal is to define a reasonable scope of responsibility - the agency stands behind its work, but does not become the insurer for every possible downstream issue.
Portfolio Display Rights
One of the most practically useful topics in the conversation is portfolio display rights. Every agency needs to showcase its work to attract new clients, but many agencies fail to secure explicit permission to do so in their initial contracts.
Without contractual language granting portfolio rights, an agency technically needs to request permission each time it wants to feature a client’s work in a case study, on its website, or in a pitch deck. This creates unnecessary friction and puts the agency in a weak position if a client relationship ends on less-than-ideal terms.
Sharon recommends including a simple portfolio rights clause in every standard contract. The clause should grant the agency the right to display the work for promotional purposes, with reasonable limitations around confidential information. Getting this right upfront eliminates the awkward permission requests later.
Independent Contractor Agreements
As agencies increasingly rely on freelancers and specialized contractors, the legal agreements governing those relationships become critical. Sharon stresses that agencies need formal independent contractor agreements with every person or firm they engage - not just verbal agreements or email threads.
A strong contractor agreement should cover ownership of work product (ensuring the agency can transfer clean ownership to clients), confidentiality obligations, non-solicitation provisions, and clear terms around payment and scope. Without these agreements, agencies expose themselves to disputes over who owns the work, confidentiality breaches, and the risk of contractors approaching clients directly.
Sharon also touches on the growing legal scrutiny around contractor classification. Agencies need to ensure their contractor relationships genuinely meet the legal definition of independent contractor status rather than being de facto employment relationships with a different label.
Staying Current with Legal Best Practices
The legal landscape for digital agencies evolves quickly. New regulations around data privacy, intellectual property in the age of AI, and evolving employment law all affect how agencies should structure their contracts and operations. Sharon recommends that agency leaders review and update their standard contracts at least annually, ideally with counsel who understands the specific legal issues agencies face.
Resources Mentioned
- Sharon Toerek on LinkedIn - Founder of Toerek Law
- Legal + Creative - Sharon’s firm website
- The Innovative Agency Podcast - Sharon’s podcast on legal and business issues