UPDATE September 10, 2020
California has enacted new law potentially exempting certain creatives from being classified as employees. This article explains the recent development.
It’s still important to be mindful of unintended consequences springing from choice of law provisions. It’s still important to know that if certain conditions are present, it is still possible for a vendor to be classified as an employee, even if the vendor is among those newly “exempted.”
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At least once every day I advise somebody about the importance of the “governing law” section of their contract. Blindly accepting a state’s law can have devastating consequences.
Today’s example. In California, if you engage a contractor and your contract states that the contractor’s work is going to be “work made for hire,” that contractor is your employee.
Why? Because California law says so. That being the case, you are responsible for unemployment and workers compensation insurance for that “contractor” just as you would be for a regular employee.
Think about it. If your California agreement with a graphic designer says your logo work is going to be “work made for hire,” that designer is all of a sudden your employee. How about the California crew you hired for your film? The developer you engaged to build an app or write some code for your business? Better make some more keys to the washroom. And save up for the employment tax bill.
This highlights not only the importance of thoroughly considering your choice of law provision; but also the dangers of casually throwing around the phrase “work made for hire.” Sorry if this sounds blunt, but it’s the bottom line: if you’re not a copyright lawyer, don’t use that phrase.
