Category: Contracts

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WMFH Affects More Than Copyrights

Creative pros have been understandably angry at the words work made for hire (WMFH) for some time. I mean, clients try to sneak that into contracts all the time and it means you, creative pro, have to carefully watch out for it, lest you sign that bad boy and end up making the client the author and owner of what should be your copyrights. So sure, those words tend to raise a creative pros hackles.

But this post isn’t about how your copyrights are affected with a WMFH contract; it’s about other effects of such an agreement.

Now, before I go any further, I’m only talking about California law here. If you are in another state, the rules (probably) aren’t the same. That being said, if you ever work in California or for a company in California, you might want to pay attention.

There is another side to WMFH agreements in the Golden State. If you are a sole proprietor business (that is, not an entity of some kind, like a corporation or an LLC), and someone hires you as an independent contractor, and the signed contract includes a WMFH clause, then you are statutorily an employee and the employer has to follow the laws regarding unemployment, disability, and workers compensation insurance as if you were a regular employee. According to the California Labor Code[1], if a person is hired to create a commissioned work and the parties agree in a signed writing that the work shall be considered a work made for hire, as defined in Section 101 of Title 17 of the United States Code, then, boom, the hired person is a statutory employee. Moreover, the California Unemployment Insurance Code[2] says almost exactly the same thing. Basically, every code that deals with unemployment, disability (including paid family leave) and workers comp has something about WMFH like this.

Anyway, failure by the employer to follow the rules means the employer can be hit with substantial fines and even jail time! Yikes!

“So what?” you may be thinking, “only the state cares but it doesn’t really affect me,” but you’d be wrong. Those are rights to which you are entitled under California law. If you get injured on the project, for example, Workers Comp should pay your medical bills (roughly speaking). Also, the law is unclear[3] about other benefits that employers in California must supply to such employees, so it may be that you, as the employee, are entitled to other things beyond being paid as an employee (including having the employer pay its half of FICA) rather than an independent contractor, like having limits on time/overtime, etc.

If you live and generally work in some other state but come to California for a WMFH project, then you too would likely be considered a statutory employee under California law as well[4], and maybe if the company is here but you aren’t. Also, if you work physically here, your pay would probably be subject to California personal income tax withholding[5].

Most importantly, if you are in California (resident/business) and you hire assistants or other independent contractor workers and you have a WMFH clause in the contract you have these people sign, you also need to know this info. You have to follow these same rules! There are ways to avoid some of these issues (for example, maybe an assignment clause instead of a WMFH), but there are downsides to the other options as well. Talk to an attorney to get the best advice for your particular situation.

Oh, and don’t forget, if you are in California, you really, really must pay your people on time.
[**UPDATE** There is more time to pay now, but it’s still faster than you might think]

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[1] California Labor Code Section 3351.5(c).

[2] California Unemployment Insurance Code Section 686.

[3] The statutes don’t seem to say explicitly one way or the other; a court could possibly make the analogy and apply the same rules to pay, time off, etc.

[4]See http://www.edd.ca.gov/pdf_pub_ctr/de231d.pdf.

[5] Id. (That means, same source as I just cited, for the non-nerdy readers).

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Breach or Infringement?

I’ve heard that some photo organizations may be suggesting that the way to avoid the costs of litigating an infringement claim is to have a liquidated damages clause in your site’s terms of service (TOS), because then (they say) it’s a breach of contract rather than an infringement. For example, if you put something on your site’s TOS like “If you use any of the work from this site without a license, you agree to pay to PhotoBob three times his usual fees for the license” and someone uses your work, then you can bring a breach of contract case in small claims court and avoid the cost of litigating infringement in federal court.

I have to say, I think this is very bad advice. I hope that pro groups are not recommending it. Short answer? It probably won’t work and, even if it could, it’s not a good choice. Let me explain.

First, it is very possible that your TOS are not binding on your visitors. There is case law that says that in order for TOS to be binding, a user has to either click to agree to those terms (called a clickwrap agreement) or those terms have to be so obvious as to, essentially, be on each page of your site–just having a separate page with your TOS won’t cut it. (Lawyers reading this, yes, I’m generalizing from the cases–we need to know the nitty gritty but creatives really don’t.)

Second, even if you could make the TOS stick, you would be limited to winning no more than your 3X number, and you’d have to prove that you usually got $X as a license fee in the first place. 3X is likely not going to be much money. In fact, it’s going to have to be under like $5,000 if you want to stay in small claims, depending on what the small claims court rules are where you are–that is, there are limits on how big a case you can bring in small claims. Oh, and you probably can’t use a lawyer (many small claims courts bar representation) so you’re going to have to do it all yourself.

Oh, and let’s say you win a judgment in small claims and the defendant doesn’t pay. You can’t then go marching into federal court claiming that it’s now an infringement and demand a lot more money. Even if by some miracle you did pull that off, that is that the court didn’t dismiss the case immediately, the court would likely say your damages are limited to the judgment you got already or darn close to it.

Third, how are you going to prove that the infringer got the work from your website? Have you posted it anywhere else, like Instagram? Good luck enforcing your site’s TOS, then.

Fourth, and this is the big one (yes, I buried the lede): copyright pre-emption will likely make your breach claim a loser. See, copyright is exclusively federal law and can only be adjudicated in federal court; so, if you bring a claim that is really an infringement claim, a smart defendant is going to tell the small claims court “Hey, this is really infringement we’re talking about here so you have to dismiss this case because this court doesn’t have jurisdiction.” I think a defendant is going to win with that and, boom, you’ve just waisted all your time (and filing fees).

There is one possible exception to pre-emption here, but it’s a narrow window and one I don’t like anyway. That is, if you agreed to license the work to the defendant and it later failed to pay for the license, then courts have said that is a breach of contract rather than an infringement (unless the terms of the written license stated that the license was contingent upon full and timely payment). See Effects Assocs., Inc. v. Cohen, 908 F.2d 555, 559 N.7 (9th Cir. 1990). Now, I think you should have written licenses and those licenses should specifically state that no license is granted until full and timely payment is received; but, if you have that, then the courts say it is not a breach of contract and, so, there you go… pre-emption again.

Really, I think it’s cutting off your nose to spite your face to try and convert an infringement claim into a breach of contract one. I mean, if you register your work in a timely manner (before the infringement) then you have the right to elect statutory damages and you have a decent chance at being awarded your attorneys’ fees as well. That is very, very likely going to be a much larger number than what you’d ever get in small claims court. More importantly, if you want to avoid litigation (and I always say: you want to avoid litigation), you have a better chance at negotiating a better result if you have statutory damages and maybe attorneys’ feesto back up your claim. A breach of contract claim is almost always some kind of wonky and the damages are limited–why do that to yourself?

 

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Get it in Writing

This NYTimes articleabout the legal limbo of some Avedon prints just breaks my heart. Besides the obvious part about the amazing work done by all, including the printers, being stuck in boxes, mostly unseen, the stories about why there are issues now make my downright twitchy.

Artists of all kinds are notorious for being crap at paperwork and many so-called great artists often offer(ed)their favors like Raylan Givens asking “one more time” with a smile, while puttinghis hands on his hips,revealing his badge and sidearm. That combo of sloppy business practices or, worse, intimidation by the Artiste, and fear of the employee/contractor to ask for something more concrete or as filthy as actual paymentwill likelyleadto situations like those described in the article, long after the artist is dead and gone.

It even happens when both sides actually like and respect each other but just don’t bother to putsomethingin writing. The road to hell, and all that.

Don’t let this happen to you and, almost more importantly, don’t put your minions in impossible situations.This means having open communication with the people you work with–interns, employees, vendors, whomever–so that you each can offer solutions about how to make something happen, without any one feeling taken advantage of or stuck in ambiguity about what s/he gets for her/his efforts. Intimidation is not becoming to anyone, even an artist. Having your minions fear you only makes you an ass (and generally makes them poor workers).

When you hire employees or independent contractors, pay them actual money whenever possible. Also, have signed agreements describing the relationship, the duties of each party, and anything else that comes up like “InternBetty gets to keep one set of the prints she makes for PhotoBob as a part of her compensation.” Veryimportantly, those agreements should describe what happens when and if the relationship turns bad and someone wants out.For individual projects with special circumstances, take the time to lay out the relationships involved so that everyone is, quite literally, on the same page.

And, whatever you do, put it in writing. A formal contract is best, but anything that lays out the understanding of the people involved and is signed (and preferably dated) by everyone is better than nothing.

Sure, you (like Avedon) won’t have to deal with whatever happens after you die, but I suspect you don’t want to leave your loved ones with big legal expenses to sort out your messes, either. Besides, it’s better business to treat everyone with respect. An agreement is the documentation of that mutual respect.

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