Galia Aharoni Schmidt, Esq.
It’s widely unknown, even among lawyers, that in California, “work made for hire” language can turn an independent contractor into an employee — a consequence that is almost never welcome, and often financially devastating.
What is “work for hire” language, why does it matter, and how can you avoid this unintended outcome?
What Does “Work Made For Hire” Mean?
The concept of “work for hire” has deep roots in federal copyright law, which mandates that certain types of work created by an independent contractor (such as contributions to a collective work or a compilation) automatically belong to the person who hired them. If it is not a work made for hire, then by default, the IP belongs to the independent contractor who created it, unless it is proactively assigned, in writing, to the hiring party.
Over time, lawyers and employers started including language in contracts that described all work as a “work for hire,” along with an assignment of the intellectual property rights, as a catch-all to make sure that the ownership of all IP would belong to the hiring party, not the person who created it. It will usually say something along the lines of “if this is a work for hire, and if it’s not a work for hire, then all intellectual property rights are assigned to the hiring party”. Seems like a good idea, right? Might as well cover all your bases?
Well, unfortunately, California law throws a wrench in this catch-all plan.
What California Law Says
California is very aggressive when it comes to making sure employees are employees and contractors are contractors. And, to an extreme degree, it prefers that workers be employees. California has multiple laws that state if the parties sign a contract where they agree that the work is a work made for hire, the contractor is automatically a statutory employee! This means the hiring party would be required to get workers’ comp insurance, disability, and unemployment insurance for all independent contractors who have signed an agreement with “work for hire” language. And if they don’t, they could be on the hook for back taxes, penalties, interest, audits, or even lawsuits.
What To Do?
Since this language is so ubiquitous, I can almost guarantee that you’ve unwittingly been a part of a California contract with “work for hire” language. It is one of the first things I look for when I’m reviewing a contract, and it’s incredibly common. If you’re in a creative field, if you’re an independent contractor, or if you ever work with contractors, I encourage you to review your standard contract and see if you can find “work for hire” language in it. Even if it was drafted by a lawyer! But especially if you got the template from the internet or from a friend. The consequences can be dire.
If you’re concerned that removing the “work for hire” language would mess up the ownership of the intellectual property, it’s a good time to call a California lawyer who’s well-versed in intellectual property law. A well-drafted contract is worth the investment to avoid audits and lawsuits down the road!
You can find the entire Monthly CEO Advisory for May by Clicking Here. If you’d like to learn more about best practices for intellectual property contract language, ABL can help. Book an appointment with us by Clicking Here.