Independent Contractor Misclassification and Compliance News October 2021

As the independent workforce continues to grow, so do the issues of worker compliance and misclassification. It is important for enterprises to remain informed about the latest laws, regulations, and developments surrounding these topics. Each month, we’ll bring you the latest news stories from around the web.

Rights to “Friday the 13th” Hinge on Whether the Author was an Employee or Independent Contractor

In a recent case, the Second Circuit Court of Appeals said that the screenwriter of “Friday the 13^th” was an independent contractor and he was therefore able to terminate the copyright of the film production companies (the rights were owned by multiple companies) under section 203 of the Copyright Act. In general, Section 203 allows the author of a work to terminate the transfer of copyright or of any right under a copyright after thirty-five (35) years unless the work was a work made for hire. A “work made for hire” is:

1. A work prepared by an employee within the scope of his or her employment; or
2.  A work specially ordered or commissioned for use as a contribution to a collective work, as a part of a motion picture or other audiovisual work… if the parties expressly agree in a written instrument signed by them that the work shall be considered a work made for hire.”

Because the parties’ agreement did not say it was a work made for hire, the question was whether the author was an employee and wrote “Friday the 13^th” within the scope of his employment.

One of the key questions the court considered was what standard to use to determine if the author was an employee or independent contractor. The production companies argued that a labor law standard should apply but the court rejected that approach and said that copyright law is grounded in the common law concept of agency.

The purpose of labor law is to mitigate and eliminate obstructions to the free flow of commerce “by encouraging the practice and procedure of collective bargaining and by protecting the exercise by workers of full freedom of association, self-organization, and designation of representatives of their own choosing, for the purpose of negotiating the terms and conditions of their employment or other mutual aid or protection.”

In contrast, the purpose of copyright law is to enrich “the general public through access to creative works.” Because labor law and copyright law have different purposes, the court relied on the factors described in a Supreme Court case, Community for Creative Non-Violence v. Reid, 490 U.S. 730 (1989) (“Reid”) to evaluate whether the author (“Miller”) was an employee or independent contractor for copyright law purposes. The court reviewed the 13 factors in Reid and concluded that Miller was an independent contractor. The court said:

Viewing them altogether, we have no difficulty in concluding that the Reid factors weigh decisively in favor of classifying Miller as an independent contractor. To review:

1. Control: This factor weighs marginally in the Companies’ favor [that he was an employee].
2. Skill: This factor weighs indisputably in Miller’s favor [that he was an independent contractor].
3. Employee benefits: This factor weighs in Miller’s favor.
4. Tax treatment: This factor weighs in Miller’s favor.
5. Additional projects: This factor weighs in Miller’s favor.
6. Duration: This factor weighs in Miller’s favor.
7. Method of payment: This factor weighs strongly in Miller’s favor.
8. Source of instrumentalities and tools: This factor carries indeterminate weight; thus, we disregard it.
9. Location of work: This factor weighs marginally in Miller’s favor.
10. Discretion in setting schedule: This factor weighs in Miller’s favor.
11. Hiring assistants: This factor is not relevant here; thus, we disregard it.
12. Business entity: This factor provides only marginal weight in the Companies’ favor.
13. Business type: This factor weighs in the Companies’ favor.

The majority of the factors—including four of the five factors entitled to greater weight—weigh decisively in Miller’s favor. We therefore conclude that, under the Reid framework, Miller is an independent contractor, not an employee.

This case is a good reminder of the importance not only to properly classify a worker as an employee or independent contractor but to document the relationships and understand the implications of the classification, particularly with respect to copyright law.

For more information, check out our resources page on misclassification and compliance. If you have any questions about engagement, classification, or management of your independent workforce, we’re always here to help.