©2019. Published in Landslide, Vol. 11, No. 5, May/June 2019, by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association or the copyright holder.
In April 2018, the California Supreme Court issued its decision in Dynamex Operations West, Inc. v. Superior Court of Los Angeles,1 a closely watched case that looked at whether drivers working for a delivery company should be categorized as independent contractors or employees under the California wage orders. The decision established a standard whereby all workers in California are presumed to be employees for purposes of the California wage orders.2 If a hiring party wishes to categorize a worker as an independent contractor, the burden is on that hiring party to show that such a classification is proper under the newly adopted “ABC test.”
Dynamex has considerable significance for California workers, businesses, and the public generally.3 The decision has resulted in much hand-wringing among business owners, and speculation as to what kind of effect it will have on the “gig economy.” Additionally, given that a worker’s classification can determine copyright ownership, Dynamex has led to some uncertainty regarding what kind of effect the decision may have on the copyright ownership of a myriad of works made by writers, photographers, producers, programmers, musicians, and other creative individuals working in California’s entertainment and tech industries.
While Dynamex may indeed have serious implications for California’s workers and its gig economy, its effects on copyright ownership will likely be negligible. That is because Dynamex pertains to worker classification for purposes of the California wage orders, not necessarily for other purposes. And when it comes to determining whether a worker should be classified as an employee or an independent contractor for purposes of the Copyright Act, the U.S. Supreme Court has held that the term “employee” should be understood in light of the general common law of agency, rather than any one state’s definition of the term “employee.”4
Dynamex serves as a reminder that a worker’s classification can differ depending on context and purpose, and that just because a worker is an employee for wage and hour purposes does not necessarily mean that same worker is an employee for purposes of the Copyright Act. This issue is important to keep in mind now, during this era of the gig economy, as state legislatures grapple with implementing laws that can be effectively applied to the realities of the workforce.
The Dynamex Decision
In Dynamex, the California Supreme Court took up the question of how to determine whether a worker should be classified as an employee or an independent contractor for purposes of the California wage orders.5 The court noted that the California wage orders impose obligations relating to the minimum wages, maximum hours, and some very basic working conditions (such as minimally required meal and rest breaks) of California employees, and recognized that “the risk that workers who should be treated as employees may be improperly misclassified as independent contractors is significant in light of the potentially substantial economic incentives that a business may have in mischaracterizing some workers as independent contractors.”6
The court examined three decisions that previously served as leading case law when it came to the question of worker classification: S.G. Borello & Sons, Inc. v. Department of Industrial Relations,7 Martinez v. Combs,8 and Ayala v. Antelope Valley Newspapers, Inc.9 These past cases established multifactor tests that looked at issues such as control over the manner and means of the work, the right to discharge, the length of time for which the work is performed, and the skill required for the work performed.10
But the Dynamex court observed that a “wide-ranging and flexible” multifactor test for determining whether a worker should be classified as an employee or an independent contractor can have significant disadvantages in the wage and hour context, where it is impractical and vague, and it allows hiring businesses to evade fundamental wage and hour responsibilities.11 Ultimately, the court elected to adopt a simpler, more structured test for distinguishing between employees and independent contractors—the “ABC test”—which minimizes these disadvantages.12
Under the ABC test, the default classification of a worker for California wage order purposes is employee.13 If the hiring party wishes to classify the worker as an independent contractor instead of an employee, it has the burden to establish:
(A) That the worker is free from the control and direction of the hiring party in connection with the performance of the work, both under the contract for the performance of the work and in fact; and
(B) That the worker performs work that is outside the usual course of the hiring party’s business; and
(C) That the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed.14
So, by way of illustration, if a newspaper company hires an outside electrician to install a new electrical line at its offices, the electrician would be considered an independent contractor because (A) the electrician is performing work free from the control and direction of the newspaper company; (B) the electrician is performing work that is outside the usual course of the newspaper company’s business; and (C) the electrician is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed. By contrast, if the newspaper company hires a writer to write journalistic pieces for the newspaper’s weekly publication, that writer would likely be considered an employee because (A) the writer is not free from the control and direction of the newspaper company; and (B) the writer is performing work that is part of the usual course of the newspaper company’s business (journalism, writing, news reporting, etc.). It is possible that prong (C) of the ABC test might favor a classification of independent contractor for the writer, but that prong alone does not suffice; under Dynamex, each of the three parts of the ABC test must be satisfied in order to justify a classification of independent contractor under the California wage orders.15
Authors and the Question of Copyright Ownership
Generally, the person who creates a work is considered its “author” for copyright purposes.16 This seemingly straightforward concept becomes complicated when work is created on behalf of a hiring party. The Copyright Act defines a work made for hire as either (1) a work prepared by an employee within the scope of his or her employment, or (2) work specifically ordered or commissioned for use in one of nine delineated categories (including contributions to collective works, motion pictures or audiovisual works, and compilations) if the parties expressly agree in a signed writing that the work will be considered a work made for hire.17 If a work is made for hire, then the “author” for copyright purposes is the employer or the hiring party for whom the work was prepared.18
If the creator of a work is an independent contractor (rather than an employee), and there is no signed writing stating that the work is being specifically ordered or commissioned for use in one of the nine work made for hire categories, then the copyright ownership stays with the individual who created the work (the independent contractor). In this way, for example, freelance writers and photographers hired as independent contractors have been able to maintain copyright ownership of their work, even if they produced the work for particular publications.
Worker Classification under the Copyright Act
The issue of worker classification for purposes of the Copyright Act was addressed by the U.S. Supreme Court in its 1989 decision in Community for Creative Non-Violence v. Reid.19 That case looked at whether a sculptor who had created a particular work for a hiring entity was an employee or an independent contractor for copyright purposes. The Court held that, when determining whether a work is for hire under the Copyright Act, “a court first should ascertain, using principles of general common law of agency, whether the work was prepared by an employee or an independent contractor.”20 The Court noted that using a federal rule of agency to determine whether a worker is an employee under the Copyright Act, rather than reliance on state agency law, is particularly appropriate given the Copyright Act’s “express objective of creating national, uniform copyright law by broadly pre-empting state statutory and common-law copyright regulation.”21
In determining whether a worker is an employee under the general common law of agency, for purposes of the Copyright Act, a court will consider the hiring party’s right to control the manner and means by which the work product is created.22 Many of the factors relevant to this inquiry fall under three broad categories:
- Control by the hiring party over the work (e.g., if the hiring party determines how the work is performed, has the work performed at its own location, or provides equipment, tools, or other means to create the work, then these factors weigh in favor of a finding of an employee-employer relationship);
- Control by the hiring party over the worker (e.g., if the hiring party controls the worker’s schedule, can have the worker perform other assignments, determines the method of payment, or has the right to hire the worker’s assistants, then these factors weigh in favor of a finding of an employee-employer relationship); and
- The status and conduct of the employer (e.g., if the hiring party is in business to produce the type of work the worker is producing, provides the worker with benefits, or withholds taxes from the worker’s payment, then these factors weigh in favor of a finding of an employee-employer relationship).23
In Community for Creative Non-Violence, the Court examined the totality of the circumstances in light of these factors and held that the sculptor was not an employee for purposes of the Copyright Act: he was skilled, he supplied his own tools, he worked in his own studio, he worked for the hiring entity for less than two months, he only worked on one assignment, he had the freedom to decide when and how long to work, he had total discretion in hiring and paying assistants, he did not receive employee benefits, and he did not have payroll taxes withheld from his pay.26 Moreover, the hiring party (an organization dedicated to eliminating homelessness) was not in the business of producing sculptures.27
One factor that the Court in Community for Creative Non-Violence did not consider was whether or not the sculptor was considered an employee under the applicable state law. That said, the list of factors discussed in Community for Creative Non-Violence was nonexhaustive, so it is possible that a court looking at a worker’s classification for purposes of the Copyright Act may consider—as one factor among many—the worker’s classification under the relevant state law. But it would not be determinative.
The Role of Statutory Purpose
Both Dynamex and Community for Creative Non-Violence place an emphasis on statutory purpose when determining whether an individual should be classified as an employee or an independent contractor. Dynamex interpreted the California Supreme Court’s prior Borello decision as calling for application of a statutory purpose standard in order to determine which classification best effectuates the underlying legislative intent of the applicable laws.28 Community for Creative Non-Violence established that the general common law of agency should be used to determine which classification should apply for the purpose of the Copyright Act, noting that “federal statutes are generally intended to have uniform nationwide application.”29
But the statutory purpose underlying the California wage orders and that underlying the Copyright Act are not the same. The policy objective of the California wage orders is to protect workers’ rights, and thus the Dynamex court found that objective is best served if a worker is presumed to be an employee (with the burden on the hiring entity to prove otherwise). The policy objective of the Copyright Act is to protect creators and their works, and so Congress has found that objective is best served if the creator of a work retains copyright over that work, except in certain circumstances where the creator is an employee or an independent contractor who has explicitly signed away rights pertaining to certain types of work.
These different policy objectives determine the tests to be used for different contexts. While a “wide-ranging and flexible” multifactor test for determining whether a worker should be classified as an employee or an independent contractor could have significant disadvantages in the wage and hour context,30 such a multifactor inquiry is appropriate in the context of the Copyright Act.31
Given the two different tests at issue (the ABC test under California state law and the common law agency inquiry under federal copyright law), it is possible for a California worker to be considered an employee for purposes of the California wage orders, but to be considered an independent contractor for purposes of the Copyright Act. Going back to the prior example of the newspaper hiring a writer to write journalistic pieces for the newspaper’s weekly publication, there may be circumstances where, on balance, that same writer who is an employee for California wage order purposes could be an independent contractor for purposes of the Copyright Act—because, for example, she works from home, using her own tools and equipment, setting her own work schedule (aside from a weekly publication deadline), receiving no benefits, with no tax withholdings, and she is only writing her weekly column for the duration of the holiday season. The outcome would depend on the facts and on how a court balances the various factors.
This kind of incongruous result is why it is important for hiring parties and workers who are creating copyrightable work product to enter into written agreements that clearly state their intent regarding the copyright ownership of the work product. In the entertainment industry, a common practice is to hire creative personnel as independent contractors and to include in their contracts language stating that the work produced will be work made for hire, but that in the event it is deemed to not be work made for hire, then the worker is assigning all rights to the hiring party. While this practice has its own limitations and potential drawbacks,32 at the very least it clearly sets forth the parties’ intentions with regard to copyright ownership, and it can serve as one of the various factors to be considered in the event of a dispute over copyright ownership and worker classification.