“Work Made for Hire” Can Convert a Contractor to an Employee

In California, a “work made for hire” (WMFH) provision in a contract can convert a contractor to an employee. This post describes the statutory basis for this little-known area of the  law.

Before providing details, I will note that the (likely unwanted) ability to convert a contractor to an employee will arise only under narrowly-defined circumstances.

• The independent contractor must be an individual rather than a legal entity (a corporation or limited liability company).
• The relevant contract must expressly specify WMFH treatment for the contractor’s work product.
• The contractual relationship must be governed by California law. (I don’t know whether any other states have similar laws.)

Background: Works Made for Hire

“Work made for hire” means, most commonly, “a work prepared by an employee within the scope of his or her employment” (17 U.S.C. Section 101).

There is, however, a second class of specifically enumerated types of works (such as translations, instructional texts, and works specially commissioned as contributions to collective works) that also qualify as WMFH if a signed contract so states. These are the types of works made for hire that are the subject of this post.

Here is an example of a contractual WMFH provision.

Company will have all right, title and interest in and to the Work Product. Company will be the sole and exclusive owner of the Work Product as a “work made for hire” under applicable copyright laws. If any Work Product is not deemed a “work made for hire“, Supplier hereby assigns to Company all of Supplier’s right, title and interest in the Work Product, including all intellectual property rights therein. Supplier hereby waives any moral rights that it may have in the Work Product.

For more information about WMFH, see Work Made for Hire – a Term Made for Confusion.

How WMFH Can Convert a Contractor to an Employee

The surprise that can accompany a WMFH provision is that there are California statutes that establish an employer-employee relationship as the result of such a provision!

For example, Labor Code Section 3351.5(c) states that “employee” includes the following (emphasis added).

Any person while engaged by contract for the creation of a
specially ordered or commissioned work of authorship in which the
parties expressly agree in a written instrument signed by them that
the work shall be considered a work made for hire, as defined in
Section 101 of Title 17 of the United States Code, and the ordering
or commissioning party obtains ownership of all the rights comprised
in the copyright in the work.

The Unemployment Insurance Code has similar provisions in Section 686 (defining “employer”) and Section 621(d) (defining “employee” by reference to Section 686).

Avoiding Unwanted Employees

If you are in California, you can do one of the following to avoid the possibility that you will convert a contractor to an employee.

• Do not bring on individuals as independent contractors. Work either with individuals who have established their own legal entities (which will be the contractors), or work with agencies that hire individual contractors as their (rather than your) employees.
• Do not include WMFH language in the contract. Rely, instead, on an express assignment of all rights (including all intellectual property rights).

Dana H. Shultz, Attorney at Law  +1 510-547-0545  dana [at] danashultz [dot] com
This blog does not provide legal advice and does not create an attorney-client relationship. If you need legal advice, please contact a lawyer directly.