Work for Hire Law: Who Owns the Copyright—Employee or Contractor?
A Business Owner’s Guide to Works Made For Hire: Part I
The work for hire doctrine is one of the most misunderstood aspects of copyright law, yet for businesses, it is one of the most important because it can determine who owns the copyright to the work being created for your business. While this doctrine is part of the federal Copyright Act, it is not enumerated in its own section. The entire statutory framework for a “work for hire” exists only in the Section 101 (the definitions section) and as a single sentence regarding ownership of a work made for hire in Section 201.
The good news for businesses is that the first part of the definition is quite simple: “a work prepared by an employee within the scope of his or her employment.” But there is still much to unpack in this definition. First of all, the word “employee” means just that. If you are a business owner and don’t pay yourself as a W-2 employee, the works you create probably don’t belong to your company. Likewise, if you hire contractors, their work does not automatically belong to your company. Finally, even the work of your employees will not belong to your company unless creating content for your business is part of their normal job requirements. These limitations can be overcome but, as discussed below, it can get complicated.
The second part of the work for hire definition is much more complicated and will be addressed in Part II of this article. Not every work is eligible to be considered a work for hire even if that was the intent of the parties and they signed a “work for hire agreement.”
The devil is in the details—or in this case, definitions. This paper will parse out each one so you will have a better understanding of the limits at the edges of the work for hire doctrine and why that is important. Part I of this paper discusses the employee/contractor relationship with the employer and Part II discusses the types of work that can be subject to a work for hire agreement.
Part I: Who is an “employee” and what is the scope of employment?
For many years, the definition of an “employee” for copyright purposes was not altogether clear. Eventually, the Supreme Court clarified the analysis in 1989 when it issued its opinion in Community for Creative Non-Violence v. Reid, 490 U.S. 730 (1989). And while it did not provide any black letter rules, it did clarify the analytical approach that needed to be applied. Thus, since 1989, the test for who is an employee is simply “the general common law of agency.”
But, if perhaps, you are wondering what the “general common law of agency” is, then you must dig a little deeper. The primary factor to consider is the “hiring party’s right to control the manner and means by which the product is accomplished.” But the Court also provided a nonexhaustive list of other factors that may be considered:
The skill required
The source of the instrumentalities and tools
The location of the work
The duration of the relationship between the parties
Whether the hiring party has the right to assign additional projects to the hired party
The extent of the hired party's discretion over when and how long to work
The method of payment
The hired party's role in hiring and paying assistants
Whether the work is part of the regular business of the hiring party
Whether the hiring party is in business
The provision of employee benefits
The tax treatment of the hired party
Of these factors, many courts have focused on five that are generally significant in virtually every case: (1) the hiring party’s right to control the manner and means of creation, (2) the skill required, (3) the provision of employee benefits, (4) the hired party’s tax treatment, and (5) whether the hiring party has the right to assign the hired party additional projects.
The control over the “manner and means” generally means the control over the process of creation as opposed to the product created. Courts will look for evidence that the hiring party actually contributed to the aesthetic choices as they would if they were directing the work of their employee. If the hiring party does not actually contribute to the aesthetic choices, it looks less like they are influencing any control over the finished product. This indicates that the person actually creating the work was not doing so as an employee, but rather as an independent contractor. This will further be influenced by the skill required to complete the project. Generally, the higher the necessary level of skill, the more likely this factor will weigh in favor of contractors. But there is also a balance across the level of skill of the employer. Thus, while an architect will likely be seen as a contractor in relation to a developer, an architectural firm could be seen as having a higher level of skill than an individual architect it employes, resulting in the firm’s ownership of plans drawn by its architect employees. The context of the relationship is what matters.
Naturally, if the hiring party is incapable of creating a work by itself, it will need to hire someone outside of the company to create the work.
Looking at the next two factors regarding employee benefits and the hired party’s tax treatment, courts do not want to see companies attempting to benefit from a worker’s status as an independent contractor in one context and then later attempting to claim authorship of a work created by an employee. This is an issue of fairness but also one of evidence. If the hiring party is providing employee benefits and deducting payroll and social security taxes and reporting income on a W-2 form, then that is very good evidence that the person is an employee rather than an independent contractor. Likewise, if they issue a Form 1099 and do not provide benefits, then it is much more likely that the person is an independent contractor. This might seem obvious—and in many cases it will be—but this is just one factor in the analysis. A 1099 worker who has been with the same company for years could still be considered an employee, and a W-2 worker who was hired on a short term basis for a single creative project could still be considered a contractor for copyright authorship purposes. Finally, if a hiring party has the right to assign the hired party additional projects, than that person is going to look a lot more like an employee than a contractor.
But employment status is only the first part of the overall analysis for a work for hire relationship. In order for the employer to be considered the author of a work, it must also have been created as part of the employee’s normal scope of employment.
To determine whether an employee’s work was performed “within the scope of employment” courts look to see if what was created was the kind of work the employee was hired to perform; whether it was created within the authorized time and space limits (i.e. normal working hours in the office rather than after-hours at home); and finally whether the work was created, at least in part, by the employee’s desire to further the employer’s goals. In today’s world of entrepreneurial spirit and side hustles, that last factor may be more difficult to prove than it was in previous generations.
Taking all of these factors into consideration, if your business relies on employee-created content, it is important to specify that creating such content is part of the employee’s normal job description. Likewise, be aware of who is creating content and what their employment status is. You cannot assume that just because your business paid for content, your business owns it. If you have any doubts, make sure you get a written assignment of the copyright signed by the person who created the work. As we will see in Part II of this article, a work for hire agreement might not be enough to convey ownership of works created by contractors.
What types of work can be subject to a work for hire agreement?
For a business hiring outside contractors to create content, it might seem like a simple matter of having the contractor sign a “work for hire agreement” at the outset specifying that everything the contractor is paid to create will become property of the company hiring the contractor. But having a signed “work-for-hire agreement” does not guarantee that the work will be considered a work for hire by the law. Yes, outside of the direct employment context, a signed agreement is necessary, but only specific types of works can qualify for work for hire status. If the work does not fall into one of the nine statutory categories, a work for hire agreement is not worth the paper it is printed on. This is why it is so important to have an assignment clause in any content creation agreement.
In the next edition, Part II will discuss each of these categories in detail and cover what to do if your work does not fall into one of these categories.
A good rule of thumb is to always get a written assignment of the copyright regardless of the employment status of the person who created the work. If your employees fall into a grey area, it is always best to reach out to an experienced intellectual property attorney. Never leave the ownership of key intellectual property to chance.
Klemchuk PLLC is a leading IP law firm based in Dallas, Texas, focusing on litigation, anti-counterfeiting, trademarks, patents, and business law. Our experienced attorneys assist clients in safeguarding innovation and expanding market share through strategic investments in intellectual property.
This article is provided for informational purposes only and does not constitute legal advice. For guidance on specific legal matters under federal, state, or local laws, please consult with our IP Lawyers.
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