In “Independent Contractors: How to Assign Copyrights“, I provided sample language for an independent contractor’s assignment of copyrights to a client. This post explains why the present assignment aspect of that language is critical.
Here (with emphasis added) is the relevant portion of the pivotal sentence:
Contractor hereby irrevocably assigns, transfers and conveys to Client all of its right, title and interest in and to the Deliverables, including complete, unconditional and worldwide ownership of all intellectual property rights in any draft or final version of the Deliverables.
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Rita Risser
I am especially pleased to welcome Rita Risser as a guest writer – not just because her post about sexual harassment is this blog’s first guest post, but because I have had the pleasure of knowing, and staying in touch with, Rita ever since we met at Boalt Hall.
As CEO of a small company, you may imagine that the recent resignation of HP’s CEO has no relevance to you and your organization. Think again.
Whenever employees or contractors are let go, they are more likely to bring claims for harassment, whistle-blowing and more. The worse the economy, the less likely they are to find other jobs and the more incentive they have to pursue alternative sources of income through lawsuits.
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An acquaintance recently showed be one of the worst contracts I have ever seen – one of the worst in the sense of unfair and unbalanced, and perhaps even unconscionable.
The company in question provides contract personnel for IT projects. Here is the agreement that candidates have to sign to be proposed for a client’s project [emphasis added]:
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In a recently-decided case (JustMed v. Byce), the U.S. Court of Appeals for the Ninth Circuit decided that a software developer was an employee, rather than an independent contractor, even though the parties had completed almost no employment-related paperwork.
Byce took over development of JustMed’s software from an employee who had moved out of state. Byce’s compensation – the same as his predecessor’s – was 15,000 shares of JustMed stock (valued at $0.50 per share) per month.
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After reading If You Don’t Set the Terms of a Copyright License, a Court Will, a (non-lawyer) friend wrote: “I work with subcontractors on a regular basis in the creative area (photographers, graphic artists, website designers, etc.). Do you know where I can find a sample [copyright assignment provision]?”
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Almost a year ago, I wrote about why independent contractors (as contrasted to employees) own the copyrights in works that they create, so a prudent customer will ensure that the contractor assigns its copyrights to the customer (Why “Work Made for Hire” is a Term Made for Confusion). This post discusses the implied copyright license that is granted in the absence of an assignment.
If there is no assignment provision, a court will determine that there is an implied license under the copyright, because it would be unfair to deprive the customer of all rights in a work for which the customer has paid. The issue, then, will be the terms of the implied license.
The one certain characteristic of the implied license is that it will be non-exclusive rather than exclusive. The reason: Under 17 U.S.C. Section 101, an exclusive license is considered a transfer of copyright ownership, and under 17 U.S.C. Section 204(a), a transfer of copyright ownership must be in writing and must be signed.
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Four months ago, I wrote about a Wall Street Journal report that the Internal Revenue Service planned to audit 6,000 randomly-selected U.S. companies to determine the extent to which companies misclassify employees as independent contractors (The “Independent Contractor” Trap Becomes More Dangerous).
Today The New York Times reported that both federal and state officials are cracking down on misclassification (U.S. Cracks Down on ‘Contractors’ as a Tax Dodge). The incentive: To reduce record budget deficits.
By misclassifying personnel, companies avoid paying Social Security, Medicare and unemployment insurance taxes. The article goes on to say that, on average, misclassified personnel do not report 30% of their income. The 2010 federal budget projects that the crackdown will net at least $7 billion over ten years.
Implication for companies of all sizes: If you have been lax in classifying workers, now would be a good time to start doing things correctly. Avoiding the “Independent Contractor” Trap may help you determine how to improve your classification procedures.
This blog does not provide legal advice and does not create an attorney-client relationship. If you need legal advice, please contact an attorney directly.
This evening I will present “Top Ten Legal Tips for Current and Would-be Independent Independent Contractors” at The Society for Technical Communication Silicon Valley Chapter.
If you are interested in the topics that I will be covering, please check out “Top Ten Legal Tips for Independent Contractors” by signing up for this blog’s Downloads page using the drop-down list in the sidebar.
This blog does not provide legal advice and does not create an attorney-client relationship. If you need legal advice, please contact an attorney directly.
Most startups and early-stage companies have limited cash. As a result, they often are eager to use stock as a major component of compensation. They need to make sure, however, that personnel stick around long enough to make the contributions for which they are being compensated.
In some instances, the corporation creates a tax-qualified incentive stock option plan. Employees are granted options to purchase stock, and they do not have to pay any tax on the stock (actually, on profits from their sale of the stock) until they exercise the option (purchase the stock, presumably, at a low price) and, later, sell the stock. (Tax law is less favorable to independent contractors.)
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Earlier this year, I wrote Avoiding the “Independent Contractor” Trap about the dangers that companies face if they misclassify employees as independent contractors. The Wall Street Journal recently reported (Employers and Workers Clash in Court Over ‘Contractor’ Label) that those dangers have increased.
According to the WSJ article, the Internal Revenue Service will audit 6,000 randomly-selected U.S. companies in its first attempt since 1984 to quantify the extent of employee misclassification. The IRS is not taking this step merely to help the individuals involved receive the pay and benefits to which they are entitled – state and federal governments stand to gain billions of dollars every year from withholding taxes, unemployment insurance and workers’ compensation if workers are classified properly.
Even greater than the risk of a government audit is the risk that a disgruntled “independent contractor” will file a wage claim (see Wage Claims – Nasty but [Sometimes] Necessary).
Avoiding the “Independent Contractor” Trap lists factors that can help you determine how to classify workers properly.
This blog does not provide legal advice and does not create an attorney-client relationship. If you need legal advice, please contact an attorney directly.
Dana Shultz is a business-savvy lawyer located in Northern California's San Francisco Bay Area (in the East Bay, near Oakland) who has in-depth knowledge of law, business, technology, and the needs of startup and early-stage companies.