By Amy Abeloff and Ken Wilton

Seyfarth Synopsis: Collaborations with athletes, actors, and singers have always been a great way for companies to grow their brand recognition and create profitable products. With the Super Bowl (and, of course, its famed commercials) last weekend, we saw new collaborations between celebrities and brands. Similar to celebrity-filled ads, collaborative relationships between influencers and companies on social media continue to be prevalent.  With California’s unique laws on classifying independent contractors, including how “work made for hire” language is interpreted in California, businesses should pay attention to best practices for a successful partnership.

Like Patrick + Brittany and Travis + Taylor: Partnerships Are Key

Nowadays, celebrities and social media influencers are more business savvy. In the past, famous people simply served as the face of a brand or endorsed a product in a short advertisement. However, celebrities and even their family members, as well as budding social media influencers are increasingly involved with brand collaborations. This includes providing input on package or product designs and colorways and overseeing the production process. Whether it is Kansas City Chiefs’ quarterback Patrick Mahomes creating a clothing line with Adidas, or a clothing collection curated by Patrick’s off-the-field partner, Brittany, with Vitality (the commercial even features Patrick and Brittany’s daughter, Sterling Skye, after whom the line was named), the possibilities are endless.  Even the mere appearance of a singer or athlete in commercials for businesses unrelated to sports or music can create brand associations, like Travis Kelce and Pfizer and Taylor Swift and Capital One. But what if the collaboration results in the creation of legally protectable intellectual property rights? Who owns the copyright? The answer to this question often turns on the celebrity’s or influencer’s legal relationship with the business.

Instant Replay—Is the Celebrity an Independent Contractor or Employee under California Law?

The difference between employees and independent contractors is critical in California. If a worker is an employee, the business must report the worker’s earnings to the Employment Development Department (EDD) and must pay employment taxes on those wages. Thus, companies have a clear interest in ensuring that the freelancers they occasionally contract with are deemed independent contractors, not employees.

Companies also benefit under federal copyright law if the Employment Development Department or influencer can be classified as an independent contractor.  The U.S. Copyright Act provides that certain specially ordered or commissioned works can be considered “works made for hire” and, when created by an independent contractor, the commissioning party is considered the author of the work (and thus the holder of the copyright).  As a result, companies often include “work made for hire” clauses in contracts with independent contractors to ensure that the company owns all copyrights in the contractor’s their work. Under U.S. copyright law, however, only certain types of works created by an independent contractor qualify as a work made for hire. You can find a complete list of the types of works that can be considered a work made for hire here. Even if the contracted work qualifies, companies should take a time out to consider California employment law, which complicates the issue.

California’s View Of “Works Made For Hire” Creates An End-Around Misclassification Rule

Normally, the determination of whether an independent contractor should be classified as an employee is governed by  AB 5, which codified the three-party “ABC” test for employment classification, as discussed in detail here.   But different rules apply when an independent contractor agreement includes “work made for hire” language.

According to California Labor Code section 3351.5(c) and California Unemployment Insurance Code section 621(d) and 686, an “employee” includes any person, including independent contractors, who enters into a written agreement to create a specially ordered or commissioned work of authorship stating “the work shall be considered a work made for hire.”

This essentially means that by including a simple “work made for hire” clause in a contract, an otherwise independent contractor is deemed an employee under California law. This apparently dispenses with the ABC classification test codified by AB 5. The independent contractor’s level of involvement in the project does not matter because the inclusion of the work made for hire clause itself determines the employment status.

Avoiding a Flag on the Play: What Companies Can Do To Adjust and Win the Game

The employment status of their celebrity and social media partners may be more starting to California companies than the 49ers’ fumbled punt in this year’s Super Bowl.  To avoid pitfalls, including penalties, companies with such partnerships and “work made for hire” contractual language, must properly classify these workers as employees. 

Alternatively, companies considering partnering with a celebrity or influencer may opt to work with an individual who has created a corporation, LLC, or other business entity (excluding sole proprietorships) and contract with the business entity as opposed to the individual. This is a common approach for celebrities who contract through an entity on a loan-out basis.  Entities are not considered employees in California and this strategy may allow a company to avoid the “work made for hire” employment risk. However, whether a loan-out company will survive an EDD audit is an unanswered question.

Some celebrities and most influencers are unrepresented by a formal legal entity. When facing this kind of situation, companies may opt to omit the “work made for hire” clause and instead acquire the requisite rights through another mechanism, such as an assignment or license. This will allow the company to appropriately utilize the work.

When dealing with an independent contractor in California, it is crucial to devise a game plan and consider the company’s end goal.  Businesses seeking to own intellectual property created by a celebrity or influencer or as a result of such a collaboration should consider an assignment of rights or a license from the content creator to avoid triggering the “work made for hire” clause.  This approach is not without its own risks; grants of rights in copyright can be terminated after a period of time which could result in the rights reverting back to the independent contractor.

Workplace Solutions

If you have questions or would like to strategize regarding compliance with this facet of California law, “works made for hire” generally, or other intellectual property and employment-related pitfalls that arise when working with celebrities, social media influencers, or independent contractors, don’t hesitate to reach out to your Seyfarth lawyer or the authors of this blog. Edited by Coby Turner and Cathy Feldman