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Law of agency

Overview#

Law of agency is a law in most Jurisdictions dealing with a set of contractual, quasi-contractual and non-contractual fiduciary relationships that involve a agent, that is authorized to act on behalf of the principal to create legal relations with a Third-party.

As in a Corporation, which is a Legal Person, must act on behalf of Agents (employees) to make an Contracts with other Principals (Natural Persons or other Legal Persons) to perform work.

In the Law of agency the Principal is the Accountable party which delegates Authority to an Agent which is the Responsible party for performance of the relationship with the Third-party

independent contractor #

An independent contractor is a Legal Person that provides goods or services to another entity under terms specified in a contract or within a verbal agreement. Unlike an employee, an independent contractor does not work regularly for an employer but works as and when required, during which time he or she may be subject to law of agency. Independent contractors are usually paid on a freelance basis.

In the United States the distinction between independent contractor and employee is an important one as the costs for Organizational Entity to maintain employees are significantly higher than the costs associated with hiring independent contractors, in part due to United States federal government and state requirements for employers to pay FICA (Social Security and Medicare taxes), unemployment taxes, and often Health Insurance on received income for employees.

Likewise, employees are protected from being fired without cause, and if fired or let go for other reasons are entitled to unemployment benefits, whereas independent contractors have neither protection nor entitlement. Employees are also entitled to receive overtime pay for work performed over the 40-hour-per-week standard, whereas independent contractors may work any number of hours (including far above this standard) with no change in pay.

"work made for hire"#

A "work made for hire" can be created by an employee or by an independent contractor. If created by an employee within the scope of his or her employment, then all such work is automatically owned by the employer as a "work made for hire".

No written agreement or mention in an employee manual is required, though this may be recommended.

HOWEVER, when work is created by an independent contractor, then the Copyright law will only qualify as a "work made for hire" and therefore owned by the employer, IF

  • there is a written agreement that the work is a “work made for hire” and
  • the work falls within one of the following categories:
    • a contribution to a collective work
    • as a part of a motion picture or other audiovisual work
    • as a translation
    • as a supplementary work
    • as a compilation
    • as an instructional text
    • as a test
    • as answer material for a test
    • as an atlas
If the work does not fall in one of these nine categories, then even a written agreement stating that the work is a "work made for hire" will not be effective in causing the work to be owned by the employer. In such a case, only a written assignment of copyright will be effective.

Computer software, websites, graphic work, and music will often not be considered included in one of the “work made for hire” categories.

More Information#

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