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Does Your Business Need a Work for Hire Agreement?

Posted by attorney Alexander Montgomery

The answer to this question is “Yes" if you want to own the work an independent contractor just created for your business without having to obtain the contractor’s permission and pay him or her royalties. Typically, any work created by an independent contractor is owned by the contractor unless a work for hire agreement is signed.

What is a Work for Hire?

The United States Copyright Act divides a work for hire into two categories as follows:

(1) a work prepared by an employee within the scope of his/her employment; or

(2) a work specially ordered or commissioned for use as a contribution to a collective work, motion picture, translation, supplementary work, as a compilation, as an instructional text, as a text, as answer material for a test, or as an atlas, if the parties expressly agree in a written instrument signed by them that the work shall be considered a work made for hire.

An employer automatically owns the copyright in any work created by an employee within the scope of his or her employment. For example, a software program created by a company’s software programmer within the scope of the programmer’s duties at the company will be the property of the company. Whether or not the author of the work is considered an employee is determined by the common law rules of agency, not by the employer’s own definition, and is further explained below.

If the author is not considered an employee, he or she is an independent contractor and a company will only own the work if the second part of the definition applies. In this case, a company will only own the work if it falls within one of the nine categories set forth in the definition and the parties sign a written instrument stating that the work is to be considered a work for hire.

When is a Person Acting Within the Scope of Their Employment?

The United States Supreme Court uses three broad factors to answer this question: (1) the control by the employer over the work, (2) the control by the employer over the employee, and (3) the status and conduct of the employer. An employer that exercises a great deal of control over how the work is created, when and how the employee must complete the work, and that give benefits, withholds taxes, and otherwise treats the employee like a typical employee has a strong argument that the employee was acting within the scope of his or her employment. For example, a salaried employee that created a news article for a newspaper at the company’s office and within standard hours would almost certainly acted within the scope of his or her employment and the company would own the news article because it would be considered a work for hire.

However, a freelance writer that had full control over the means and content of an article, who wrote the article on his or her own time, and wrote the article for a company not in the business of producing such articles was probably not an employee acting within the scope of his or her employment. In this case, the company would not own the work unless the work fell within one of the nine categories above and a work for hire agreement was signed.

Consequences for Businesses.

The implications for businesses can be costly. For typical employees, a work for hire agreement is not necessary. However, a business that uses an independent contractor for one of the nine works listed in the Copyright Act but does not have the contractor sign a work for hire agreement does not own any rights in the work. Consequently, the business cannot reproduce, publish, copy, or otherwise use the work without the permission of the author because such use would subject the business to copyright infringement liability. The author of the work would therefore have a great deal of leverage in squeezing large royalty payments out of the business in exchange for a license to use the work.

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