As the owner or manager of a newly minted business, you are likely inclined to engage independent contractors to design your web site, create your marketing materials and perhaps even provide services to your clients. Engaging an independent contractor is often more attractive than hiring an employee as a way to avoid the hassles, costs and risks of employment (e.g., withholding payroll taxes, paying benefits and exposure to employment-related claims). However, you likely want to own the contractor’s work product. To that end, many companies require the contractor to sign an agreement that provides that the contractor’s work product is “work made for hire”. But you should be wary of the potential pitfalls of such an agreement.
Specifying that a contractor is creating “work made for hire” may not be enough to ensure that you own the work product. Under the Copyright Act, work product of a contractor is only a “work made for hire” if it falls under one of several specific categories. A mobile application, for example, may not fit within any of these categories. Therefore, it is important for your agreement to state that if the contractor’s work product is not a “work made for hire”, then the contractor assigns all rights in the work product to your business.
Also, specifying that a contractor is creating “work made for hire” may result in the contractor being classified as an employee under state law. In California, for example, a person who creates “work made for hire” under a written agreement is an employee, and the employer will be responsible for obtaining workers’ compensation insurance and contributing to unemployment insurance for the employee. (Note that the law may not apply if your agreement is with an entity (corporation, LLC, etc.).) If such a law applies, you will want to remove the “work made for hire” language from the contract and instead state that the contractor assigns all rights in the work product to you.