The High-touch Legal Services® Blog…for Startups!

© 2009-2019 Dana H. Shultz, Attorney at Law

Independent Contractors: How to Assign Copyrights

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]?”

(more…)

If You Don’t Set the Terms of a Copyright License, a Court Will

Picture of a pen sitting on a contract sighature line, symbolizing an implied copyright licenseAlmost a year ago, I wrote about why independent contractors (as contrasted to employees) own the copyrights in works that they create. As a result, a prudent customer will ensure that the contractor assigns its copyrights to the customer (Work Made for Hire – 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. The rationale is that 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. (more…)

Contractors as a Tax Dodge – NYT Reports U.S. to Crack Down

Logo for New York Times, which published an article about independent contractors as a tax dodgeFour months ago, I wrote about a Wall Street Journal report. According to that report, 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. (See 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 of contractors as a tax dodge 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.

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.

Top Ten Legal Tips for Independent Contractors (Presentation)

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.

Stock is Great – but Don’t Give It Away Too Quickly!

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.)

(more…)

The “Independent Contractor” Trap Becomes More Dangerous

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.

Top Ten Legal Tips for Independent Contractors

I just made available on the Downloads page (sign up using the drop-down list in the sidebar) “Top Ten Legal Tips for Independent Contractors,” a document that describes how independent contractors can avoid exposing themselves to unnecessary legal risks.

Here are the titles of the ten tips, which are discussed in greater detail in the document:

  1. Choose the right type of legal entity for your business
  2. If you choose a corporation or LLC, comply with applicable formalities
  3. Buy the right types and amounts of insurance
  4. Identify and protect your intellectual property
  5. Use your form of client agreement whenever possible
  6. Be careful when assigning or waiving intellectual property rights
  7. Be careful when collaborating or subcontracting
  8. Be careful with nondisclosure / confidentiality agreements
  9. Avoid oral agreements whenever possible
  10. Understand what distinguishes independent contractors from employees

For more information about distinguishing independent contractors from employees (tip 10), please see Avoiding the “Independent Contractor” Trap.

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.

Presenting to the Society for Technical Communication on October 14

On October 14, 2009, I will make a presentation to the Berkeley chapter of the Society for Technical Communication. The topic: Ten Legal Tips for Current and Would-be Independent Contractors.

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.

Avoiding the Independent Contractor Trap

Photo of a mouse trap with money in it, symbolizing the independent contractor trapSmall companies usually need to conserve cash, so they often turn to independent contractors rather than employees. This makes perfect sense – unless the company falls into what I call the independent contractor trap.

If there is not enough work to justify a regular employee, the company can use an independent contractor when needed. That way the company avoids making unemployment and social security contributions. Also, it does not pay benefits such as health and life insurance, retirement plan contributions and personal time off.

There can be problems, however. If the individual really is doing the work of an employee – is misclassified – the Internal Revenue Service or, in California, the Employment Development Department might reclassify the individual as an employee, erasing the presumed financial benefits.

(more…)