Employees and Contractors


Legal Survival Guide


Lesson Info

Employees and Contractors

We are going to talk about employees and contractors, then we're going to talk about the contract. So this is great stuff buckle in again if you have employees, if you have independent contractors, and if you're a creative professional, you must understand this, and I've summarized it for you on the next slide. If you're an independent contractor, the copyright is owned by the independent contractor. If you've hired the independent contractor, you don't own it. So if I'm a graphic designer and I farm, some work out to another graphic designer and he sends me the design, I don't own the copyright to that design. If I'm a photographer and I hire a second shooter to work as an independent contractor a wedding, unless they have a written agreement he owns, the copy owns the copyright to it makes sense your employees, the copier I will always be owned by the employer. If there's a true work for hire agreement where it is in writing that I am hiring you on a work for hire basis, then the cop...

yright is owned by the commissioner or the person that hires the person doing the work for hire work these air three fine points that you have to understand in order to to manage your intellectual property is a creative business let's recap. Hey, independent contractors second shooter's not employees somebody that I'm not holding taxes out on somebody that I don't have a w four form from a nen dependent contractor a ten ninety niner they own the copyright to whatever they create every time they push the shutter button they own it how do we get around it? We converted into a work for hire and I'll tell you later I've got my my independent contractor agreement on my forms disk if you have that, you'll use the independent contractor agreement and it transfers that copyright to you is the owner again your employees no problems if some of the folks from creative lives since somebody into snaps the pictures of me today and who wouldn't want to do that, jim I mean really that's in fact somebody needs to do that right now I got makeup on I feel pretty cinnamon they're on their way creative live will own the copyright to that image because thie employee of creative life came in and shot the picture makes sense bob's gonna help me out he's getting this is iphone out here comes here comes blue steel blue steel photography okay, so that's the finer points of employees and copyright when we talk about employees remember this I'm not going to go into it, but this is these are words to live by higher slow fire fast hire the right people for the job and when you realize that you don't have the right ones get rid of them don't try and fix it that comes from twenty years of running multiple businesses my law firm's been in the same place for one hundred one years because we deliver rockstar customer service to our clients and we have great staff and we don't let bad staff ruin or sour our relationship with our clients because we make sure that as soon as we realize somebody's not a good fit um we give him an opportunity to be successful elsewhere um the forms that we use uh to to bring an employee on board or the irs form for that's what they give us their sole security number the state form which is a you know washington w for a california w four and then don't forget the I nine because there's some immigration requirements to hiring folks you have to fill out the nine now when we have employees on the next slide you'll see that we have to withhold taxes possible or comp issues this is minimum wage everybody understand there's a federal minimum wage of about seven sixty five an hour if you work in excess of forty hours a week you have to pay them time and a half with the overtime requirements and they're certain deadlines to issue them w two's but employees were generally worth it because you can control them we're going to talk about this right to control later, but I like employees don't be afraid of them. The irs gets to decide whether or not you've hired an independent contractor or an employee the heck you say the irs can't tell me that that's an independent contractor because I told him he was a ten, ninety nine employees and I wasn't holding any taxes out on him and I certainly wouldn't going to give the government any texas because he's an independent contractor, the irs has a twenty factor test that we're going to look at right here if you're an employee um and I don't want to get bogged down in this because I want to get to the contract discussion, but we can't pass this up. An employee generally is only gonna work for you were an independent contractor is going to work for lots of folks, okay? An employee generally, the employees can't lose money on the gig. An independent contractor has the opportunity to lose money on the gig what's that mean well an employee if they show up for work, we're going to get their hourly rate or their day rate or whatever, they don't have an opportunity to lose money I hire a plumber and the plumber comes in and says, I'll fix your saying for thirty bucks and it turns out the part for the sink is sixty bucks can the employer if you're going to include the part lose money on that gig? Sure, generally the employees are going to use your equipment independent contractors are going to use their own equipment so if you've got independent contractors as you call them and you're handing them cameras and equipment lenses and lights yikes um you have the right to control your employees as faras the time, scope and manner of their work and again see what says the word right doesn't mean he actually have to be cracking the whip telling him what to do but do you have the right to do it if you do, they're your employees if they're not subject to your control independent contractors generally employees do work typical of employees and independent contractors or tipple typically independent but here's a big one the employees have to perform the work personally so if I say hey bob, um you know, I want you to be my employees were gonna go out and shoot this wedding together, you can use my camera uh I'll see you at the church and bob sends jim with his rebel out to do the work and jim says, hey, bob couldn't make it I'm substituting for him today, I've got a problem with that because my employees doesn't have the right to substitute, but if I say hey mob I want you to second chute for me we're going to meet it st mary's at one o'clock on sunday bring your equipment um you're going to be the second shooter jim shows up uh with his equipment to shoot. Typically if bob were an independent contractor, I can't complain about that. This all makes sense, so I don't get to pick what I call above the irs is going to apply its twenty factor test and if I miss classify well, let's go in the next slide. Uh, the value the benefit of independent contractors are I don't withhold taxes there's no work calm, but my insurance doesn't cover him, so when bob drops his, what would you get that night? Hunty eight hundred? Is that what you're going to get when you dropped it on the baby at the you know, christening or whatever we're shooting or you hurt somebody or you do something my insurance is going to say, I'm not covering bob bob, he doesn't work for you bob's on his own so my insurance doesn't cover bob bob being a cheapskate, he doesn't have his own insurance because I didn't bother to get a copy of his insurance form, which my independent contractor agreement requires bob to certify that he's got insurance don't hire people is independent contractors that don't have insurance or going to a lot uh there are ten, ninety nine deadlines so if I pay bob moore in six hundred bucks he's got to get a ten, ninety nine at the end of the year and the big one is independent contractors they get to compete against you unless you have a non compete agreement okay so onto the next slide um there are some risks of misclassification so let's say that bob he's been my independent contractor for decades and we've gotten along famously but bob's really been my employees you get it we just kind of worked it out bob's taking care of his own taxes now bob and I have a falling out bob doesn't like me anymore first thing bob does and I've seen this happen over and over again is he's going to call up the state and federal taxing folks and say by gum I've been an employee of that blue steel photography and they haven't withheld any money on me yet they haven't that's all bob has to say and then I get the call from the auditor the otter goes and applies this twenty factor test and then they take the last five years of wages say craig yo seven point five percent tax on bob plus your federal unemployment will go ahead and add some of these penalties on just cause we're feeling nice we'll throw a little bit of interest on and please write us a check for forty grand true story so we treat bob right from the beginning and then if bob gets mad at us there's no risks of misclassification alright next slide says um the pros of employees or they have to be loyal independent contractors can compete against you so I'm never worried too much about competition umm so I like I tend to like the uh the the well I use them both so it really depends on your situation all right, what we got on the next flight employees in contrast with independent contractor contractors we do withhold the taxes we have some work calm way have to pay a minimum wage. Okay, so what can we dio? I can use an independent contractor agreement and again this is on the forms disc what's it say it says blue steel photography located here we're gonna have an event and it's ah it's the smith wedding and it's going to be from one to three on, you know december thirty first here's the fee on paying hears any mileage and paying who's providing the media cards any special equipment required um who's doing the post production deadline to deliver images, if any maybe bob's just given me the cards at the end of the gig and I'm doing post on it but we go through this and in the independent contractor agreement it talks about that this doesn't create unemployment relationship it doesn't make him a partner a co adventurer or any agent of the studio he's holding himself out to the public performing the services of a photographer and works for other people see what I'm walking bob through I'm walking him through the twenty factor test well trust me I'm not going to read this whole agreement to you but I deal with most of the twenty factors in the agreement and then we get down to the indemnification provision that says look bob hurt somebody and I get sued for bob's negligence bob's going to make it right and pay me back for any expenses that I incur on his behalf including attorney speaks and then we go to the term sheet that's on the back and it says he's gonna bear all the financial responsibility I'm not responsible he exonerates us um etcetera he's got insurance and then he signs it um and also in there is let's see here so he gives that to me and I save it I keep that with the job file for that wedding all right then we've got what's called an employment agreement so if I were hired an employee I just make sure that I describe that he that what that employees going to dio they're not going to compete against me they're not going to disclose any of my information they're going to devote their full time and best efforts to doing their job um they're going to get these benefits. I'm gonna pay you as follows. Here's, their job description. It's got the studio info, etcetera. I also have for the independent contractors and the employees confidentiality agreements. So as I trained them and I tell them about my business and my customers and who I deal with, they agree to keep all of that information confidential. Um, because we want to protect our confidential information to prevent competition. We can use these confidentiality and non compete agreements to protect our livelihood. Weaken limited geographically. Hey, bob, thanks for working for me in an exchange for all of the vast sums of money that I'm gonna pay you. You agree not to work as a photographer within twenty five miles of the city centre of seattle, washington for a year. Bob can choose to sign it and work for mayor. Bob can choose to go work for you know somebody else it's up to him so way have the ability to prevent competition with these agreements. Its enforceability varies, but most states will allow you to enter into a non com with somebody if it's for fair. They don't want to have us putting people out of business, but they can say that we have the right to protect our work for a limited time within a limited area. So could I say a hundred miles of seattle? Probably not. Could I say ten years? Probably not. Could I say ah mile in one year? Generally always so that's gonna vary my agreement that I use says if this agreement is ever deemed to be overbroad, then we hereby agree that the contract will be reduced to the largest enforceable time and distance period that we can get away with under the law. That actually says that. So if the court ever had to go in and re construe it, if I didn't put that in there, all right, they'd throw the whole paragraph out, but because I put that in there, it keeps it on the life support you like that, don't you? All right. So here's, the non comp agreement here's the read paragraph that's the one that might be too broad might not be brought enough and I've got a note on it. All of this stuff in white with the yellow is all on the disk. Um and again, here's the confidentiality non compete agreement. If anybody wants that justo make it easy for you, you go to crate heidemann er dot com and again the creative live specials eighty nine dollars so just pop over there and you can download what's not you actually get a disk in the mail just like this one so I'll mail that to you just as soon as you get your order in um and again that's ah creative live special eighty nine dollars my name dot com okay, so payroll quick note we've talked about employees payroll is a headache. All right. Um I love payroll companies. They are cheap. They're so cheap with your first pay roll here's the things you're gonna have to do withhold some state taxes we talked about that. Withhold your federal tax withhold six point two percent of the employee's salary for social security six point two for social security. Another one point five for medicare you gotta pay one point. Five all this adds up to who's. Got a calculator. That's twelve point four plus twelve point four plus three point nine one is that. Come on, bob. You're a scientist. What is all that? Twelve point four plus two point nine fifteen three that's what? The that's what the combined pika is fifteen three so half is paid by the employer has paid by the employee. We pay that monthly by the fifteenth of the month, we get a father reports for the government take a look at irs pub fifteen. It is a great resource. Irs publication fifteen will tell you all that you need to know about payroll taxes, so next line a quick note about discrimination in employment it is illegal there are different ways that we could get sued by our employees it's generally an at will employment so I always tell folks you can fire somebody because they were a red shirt to work I am so sorry that you were that red short you are fired you're insane hide him and what you mean you're fired me because I have a red shirt that's just the mood I am that's how I roll that's perfectly legal there's nobody getting your job back if I fire him because they were a red shirt okay but under the americans with disabilities act when my I've got a disabled employee and I treat them differently as to the terms of their employment or or fire him due to their disability I've got a problem title seven is a federal law that protects sex, religion, national origin etcetera if I discriminate against somebody based on their sex national origin race or religion I've got a problem the a d a is the age discrimination in employment act you say well heck, I don't have any old employees that doesn't apply to me kicks in at forty I'm in a protected class now thank you very much forty four um and then there are local laws dealing with sexual orientation there is no national protection for discrimination based upon sexual orientation or gender identity at this time however a number of states and local entities have a variety of laws that apply to that so I'd encourage you to check with your, uh your your local uh state or local um I don't know where you go look do a little google search to see if there's any protections for there I am telling you to go to the web to get some legal advice. Mallory that's not what I told anybody to do is it? I just can't speak to it, so consult with your local attorney a cz faras any local laws on discrimination based on that but with that there's also some poster requirements and if you don't put up these posters if you have employees even in my house I've got posters in my house for my employees there, you know, in the laundry room, but I've got my posters. Uh, the bonus materials do include posters, a link to get free posters who doesn't want some free posters and you get it in russian that one is in russian. So how about that we put the poster up in russia that will help those employees figure out what their minimum wage obligations are seven twenty five federal minimum wage I can't even read that in russian krilic uh but anyway that's included in the bonus materials so we have come a long way let's all take a deep breath we have just knocked out of the park sales tax and employee relations right? So now you are a human resource guru um our next topic that we're going to dive into I think is um doing some business who wants to do some business blue steel needs some clients hey, great before I move on, how about we tackle couple questions and maybe from the from the studio audience and then also I know we talked a little bit about your disk that you have on sale during that segment a little bit could you maybe holding up until again what that sale is please sure we've got in order that we're going through things even in a two day class we're still moving in a pretty good pace on dh there are certain things that were going to use if we're going to be a successful business if we're doing wedding photography I've got along in a short form wedding contract on here I've got a portrait contract if you're doing boom and we're going to talk about these contracts at length in a few minutes it's got the boudoir contract on it event contracts a second shooter assistant contract work for hire agreement why do we need to work for hire agreement? Because we want that copyright right? We've got to have that and if we don't get it in writing orel agreement is worth nothing so that's on here we got the llc operating agreement tons of copyright transfer license forms three or four model and property releases a bill of sale remember we talked about wait talk to the break about how we're gonna capitalize on new business transferring our camera equipment to our new business when you use the bill of sale which is on the disk um kind of collection letter copyright letter so that's all on there excellent well, any questions in the in studio audience we're good all right what do you think the internet is full of curiosity matthew you ask how much money would I have to pay a second cheater as an independent contractor as opposed to an employee it seems as if bob as our example would want extra money to conform to restrictions of the contract I would um independent contractors uh generally get paid a little bit more than employees. Uh this is you know, I've had this come up with my my folks um when I'm paying my employees hourly they get bin out of shape with me because sometimes on some of the gigs there working as an independent contractor and sometimes I'll have him work is an employee so when they come in and do editing they like to get their day rate you know, maybe they want for five hundred dollars a day for editing won't know when you're using my equipment at my place using my software you know, you could have twenty five bucks an hour. If you're out using your creative skills and your equipment, I'll pay a day rate, or what have you so independent contractors generally will get paid maur if they're out working on their own? Because, look, they've gotta pay their own taxes. They've gotta pay their own medical bill. Medical insurance, health insurance, retirement, etcetera.

Class Description

Ready to turn your creative side project into a thriving business? Join Craig Heidemann for an introduction to the business and accounting principles every creative professional needs to know. 

In this class, Craig will take you step-by-step through the process of setting up, running, and growing a small business. You’ll learn how to use QuickBooks to manage your finances, including managing client contracts and invoices. Craig will also help you navigate the potentially-confusing tax, legal, and copyright issues surrounding small businesses. You’ll also learn how to contract and/or hire people to do the tasks you can’t do yourself. 

Whether you’re just starting out as a business owner or you’re a longtime entrepreneur ready for a refresher course, this course will give you a roadmap to business success.


a Creativelive Student

I'm literally fresh off the boat, as the saying goes, having moved back to the US after decades of living abroad. I have the photography down (in some measure due to the instructors and courses here at CL), but being new to the business of photography in this environment I was rudderless. This course helped answer all my initial questions and put me on the way to getting established in my region... and beyond! Craig makes legal issues almost fun with his jocular, engaging style. Thanks so much to Chase and the people at CL for knowing what courses real working photographers need.

Andrew V Gonzales

This class is amazing (as is the Instructor). Funny, real, and to the point, Craig has a great way of making these aspects of business MUCH less intimidating. Still very applicable even in 2016. Loved it!