The Wages Of Omission

Submitted by patentadmin on Tue, 12/21/2010 - 16:38

Today we learn a lesson about overreaching and its possible consequences.

Most companies – those run by competent managers – require their new employees, at the time they commence their employment, to execute agreements specifying that any intellectual property created by the employee in the course of his/her employment is the property of the employer. All well and good. Some companies, however, have sought to go further, seeking ownership of any and all intellectual property created by an employee at any time during the employment – even if the said property was unrelated to the employment. Indeed, some companies have used the threat – implied or express – of termination to demand that existing employees execute such broad agreements. Not good.

Recognizing the impropriety of such agreements, eight states now have laws holding void, as against public policy and/or as lacking adequate contractual consideration, any such agreement obtained without any “additional compensation.” In this context, “continued employment” is NOT deemed to be “additional compensation.” In a further effort to prevent employers from overreaching, California specifically exempts from claim by the employer any invention, or other intellectual property, created outside of the workplace and without use of the employer’s facilities.

A related question arises from the employment of consultants, who are not employees at all but are “independent contractors.” The copyright of a work created by an employee in the course of his or her employment vests in the employer. Such a work is known as a “work for hire.” In the absence of an agreement to the contrary, the rights to a work created by an “independent contractor” vest in the contractor. Obviously, however, the employer of the “independent contractor” is in a strong position to “require,” not to say “coerce,” execution of a “work-for-hire” agreement. This, too, is deemed overreaching.

California, once again at the forefront in protecting the rights of everyone except tax-paying Republicans, has hit upon a unique scheme to prevent such oppression of “independent contractors.” Under California law, anyone commissioning a “work-for-hire” is considered the employer of the creator of the work for purposes of workers’ compensation and unemployment insurance. Therefore, anyone creating a “work-for-hire” becomes an employee and the employer is obligated to provide workers’ compensation and unemployment insurance. Here’s the kicker: under California law, an employer must obtain workers’ compensation insurance BEFORE any work is performed. Failure to do so is a criminal offense, for which the state may assess penalties of up to $100,000.

THE LESSON TO BE LEARNED: Be careful what you ask for and don’t overreach.

Submitted by Anonymous (not verified) on Tue, 01/04/2011 - 14:47


From what I understand, however, there's already quite a bit of gray area vis-a-vis the "work for hire" situation -- i.e., although an employer may call someone an "independent contractor," courts may nevertheless deem such contractors to be de facto employees. My understanding is that there is a list of factors used to determine whether or not an "independent contractor" is actually an "employee," and these factors are applied on a case-by-case basis ... yes?

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