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Calif., Federal Classification Clash Can Be Filmmakers' Nightmare, Says Entertainment Attorney

01/09/2018

In a bid to cut overhead while securing control over films and other creative projects for the duration of the copyright period, an increasing number of entertainment companies and producers implement "work made for hire" agreements when they engage actors, writers, illustrators, or other creative contributors. But a clash between the U.S. Copyright Act and the California Labor Code can create a nightmare for these companies and producers in the State of California, cautions Christiane Cargill Kinney, chair of the Entertainment Industry Team of national law firm LeClairRyan.

When multiple individuals contribute to a creative work–which happens frequently in music, film, television and other industries—joint authorship in that work can become problematic if not impossible to manage, observes Kinney, a partner in the firm's Los Angeles office.

Recognizing that, the Copyright Act created a "work made for hire" classification to recognize a work that is prepared by an employee within the scope of his or her employment—or a particular type of work specially ordered or commissioned for use—where the relationship is expressly agreed upon in writing. "In such instances, the employer or person commissioning the work is considered the 'author' of the work," she writes in a recent post on the firm's Workplace Defender blog.

Although the Copyright Act makes a distinction between "employees" preparing a work within their scope of employment, and commissioned authors, California Labor Code § 3351.5(c) defines any person while engaged by contract for the creation of a specially ordered or commissioned work of authorship to be an "employee."

"This is also the case under California Unemployment Insurance Code §§ 686 and 621(d)," Kinney adds. "Suddenly, your consultant or independent contractor may be entitled to minimum wage, overtime, back taxes, penalties and interest, rather than the flat fee that you initially paid them for their contribution to your creative project."

California also requires employers to register with the state Employment Development Department within 15 days after paying an employee in excess of $100 in wages, to maintain workers compensation and unemployment insurance, and to post certain notifications for its employees. The creation of an employment relationship comes as no surprise to major film studios or record labels, but "the growth of the independent market, the industry standard, and use of boilerplate contracts secured online for a fraction of the cost of hiring an attorney, have exacerbated this problem," Kinney notes.

Fortunately, there are ways to structure a project to reduce the likelihood of creating an unintentional employment relationship where none was ever contemplated, she counsels. "First, consider commissioning the work directly from a loan-out company for the talent, if possible, as the California Labor and Unemployment Insurance Codes relating to works made for hire apply to individuals, rather than entities. Second, consider using transfer and assignment language, in lieu of the 'work made for hire' language. While such transfers can be terminated in the future and therefore are not as beneficial as the work-made-for-hire, the termination of transfer rights is not automatic, and must be exercised under stringent notification and timing requirements."

A "work for hire" arrangement can be vital to preserving the rights of a producer or film company, she notes. "Nevertheless, using legally appropriate language may be preferable under certain circumstances in order to help circumvent the accidental creation of an employment relationship in the State of California where such a relationship was never contemplated."

The full blog is available at: https://lrworkplacedefender.com/the-legal-pitfalls-inherent-in-using-works-made-for-hire-in-california/

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