Businesses commonly engage consultants, freelancers, or independent contractors to produce proprietary content for their business -- also known as intellectual property. This can include logos, branding, copy, websites, coding, inventions, trade secrets, and other protectable content.
Generally, businesses are not required to offer independent contractors the same rights and benefits that apply to employees, such as minimum wage, overtime pay, and insurance.
However, unbeknownst to many entrepreneurs and small business owners, if you engage in a “work-for-hire” agreement that grants you or your business all ownership rights to content created by a contractor, a California law requires you to treat that individual as an employee for certain purposes.
These statutory "employees” are entitled to both workers compensation and unemployment insurance pursuant to California Labor Code, Section 3351.5(c) and 621(d) and 686 of the California Unemployment Insurance Code. However, there are work-arounds that allow business owners to take full ownership to contractor created content without creating an employee relationship through the creation of an "assignment" agreement.
We recommend you check out your agreements with your workers and make sure you are using the right language for your circumstances.