4.11.2019

Employees v. Contractors: A Guide for Agencies

Every day, creative agencies develop IP for their clients’ projects. This IP includes the development of brands or trade marks, copyright subsisting in creative works, as well as visual elements, digital design and code.

Agencies are liable for the work produced and sold to clients, yet they can only sell what’s produced by their employees as IP to their clients, and not that of Contractors/Freelancers unless a valid IP Assignment Agreement is in place.

The distinction between employee and contractor can be particularly important in the context of a creative agency environment, with creative input from multiple individuals and contractor engagements.  

Appropriate structuring is therefore paramount for agencies in managing the flow of commercial engagements – from the client, to freelancer, to the ultimate sale of IP developed in the provision of creative services.

Recent clarifications to employment law have increased the importance of the distinction, with contractor relationships now being more heavily scrutinised, potentially influencing legal outcomes. The current framework begs a holistic assessment of the relationship and engagement as a whole; written agreements may be held inadequate in demonstrating evidence of an individual acting in the capacity of a contractor, irrespective of title and form.

Given the importance of the employee v. contractor distinction in the creative agency environment, we’ve prepared a guide on how the law perceives the distinction and the elements that will affect:


Element

Employee

Contractor / Freelancer

Independence as a legal entity

A part of the company, all creations and rights will be owned by the company

Individual entity – usually requires an ABN, creations and rights of work should be assigned for the sake of clarity

Term projects on an ad hoc basis

Long-term and may be indefinite employment

Engaged for term basis, specifically for the time frame of the project

Project/term allocation

Consistent and repetitive work description or job description

Engaged for all skills relevant to a single project, not consistent or repetitive engagement

Premise of work

Generally, at the allocated workplace (or as employment terms allow)

May be anywhere, as long as the work is complete

Work for other entities

Not usually allocated for

Generally expected that contractors are free to work for any number of clients within their capacity

Payment

Salary or hourly wage basis

Invoiced on an hourly rate basis


Given recent developments, if it’s been some time since your commercial agreements were reviewed, we recommend engaging a professional to revisit those agreements, looking particularly to this distinction and its bearing on IP clauses.  

We can assist you to ensure your suite of commercial agreements allows for the desired employment and commercial outcomes.  

Need further advice? Simply get in touch. 

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