Opinion ID: 596113
Heading Depth: 3
Heading Rank: 3

Heading: /d. The Employee Benefits and Tax Treatment

Text: 32 The district court found that Aymes received no employee benefits from Island, but disregarded this factor as merely being an indication that Aymes was an employee who worked off the books. It is undisputed that Aymes was not provided with health, unemployment, or life insurance benefits. Similarly, it is uncontested that Island did not pay a share of Aymes's social security taxes and did not withhold federal or state income taxes. 33 The failure of Island to extend Aymes any employment benefits or to pay any of his payroll taxes is highly indicative that Aymes was considered an outside independent contractor by Island. Indeed, these two factors constitute virtual admissions of Aymes's status by Bonelli himself. Moreover, they also point out a basic inequity in Aymes's treatment. Island benefitted from treating Aymes like an independent contractor when it came to providing benefits and paying a percentage of his payroll taxes. Island should not in one context be able to claim that Aymes was an independent contractor and ten years later deny him that status to avoid a copyright infringement suit. 34 These two factors are given even greater weight because they are undisputed in this case. During the ten years in which this case has been litigated, all the other issues have been hotly contested. But for purposes of benefits and taxes, Island definitely and unequivocably chose not to treat Aymes as an employee. Island deliberately chose to deny Aymes two basic attributes of employment it presumably extended to its workforce. This undisputed choice is completely inconsistent with their defense. 35 The importance of these two factors is underscored by the fact that every case since Reid that has applied the test has found the hired party to be an independent contractor where the hiring party failed to extend benefits or pay social security taxes. See MacLean, 952 F.2d at 777; Marco, 969 F.2d at 1550; M.G.B. Homes, 903 F.2d at 1492; Johannsen, 797 F.Supp. at 841; Kunycia, 755 F.Supp. at 575; Kelstall-Whitney, 1990 WL 69013, 1990 U.S. Dist. LEXIS 6186. 36 e. The Right to Assign Other Projects 37 The district court found that Bonelli had the right to and did assign Aymes other projects in addition to the creation of CSALIB. This is fairly strong evidence that Aymes was an employee, since independent contractors are typically hired only for particular projects. However, this factor carries less weight than those evaluated above, because the delegation of additional projects to Aymes is not inconsistent with the idea that he was Island's independent trouble shooter who might be asked to intervene as computer problems arose. Accordingly, this factor weighs fairly strongly but not conclusively for Island. 38 f. Remaining Factors 39 The remaining factors are relatively insignificant or negligible in weight because they are either indeterminate or inapplicable to these facts. It is important to address them each individually, however, to show why they are relatively insignificant. Although none carries much weight, they are addressed in order of their relative importance in this determination. 40 The method of payment is a fairly important factor, but it is indeterminate in this case because there is evidence to support both sides. The district court found that Aymes was sometimes paid hourly wages and at other times was paid a flat fee for completing a specific task. The court recognized that this factor might lend some support to the idea that he was not an employee, since the lump sum payments indicate that Aymes was contracted for individual assignments. The payment of regular wages, however, indicate that Aymes was an employee. We therefore agree with the district court that this factor is indeterminate. 41 Whether the work is Island's regular business is a factor that weighs in favor of Aymes's contention that he was an independent contractor. The district court found that this factor weighed in Island's balance because it was part of their regular business activity to modify programs for their computers. The district court misinterpreted the category, and its finding is, therefore, erroneous. The purpose of this factor is to determine whether the hired party is performing tasks that directly relate to the objective of the hiring party's business. For example, work done by a computer programmer employed by a computer software firm would be done in the firm's regular business. Because Island Swimming is involved in the business of selling swimming pools, however, Aymes's programming was not done in the company's regular business. 42 We find, however, that this factor will generally be of little use in evaluating a claim that a work was made for hire. This factor carries very little weight, because pool companies do not survive by merely hiring pool designers and salespeople. For example, most companies hire numerous support personnel such as managers, accountants, secretaries, custodians, and computer programmers. That Aymes did not work in Island's regular business is not strongly indicative of whether he was an independent contractor, even if it does weigh in his favor. 43 Whether Island is in business is a factor that will always have very little weight in this analysis. Island was in the pool business, but this indicates nothing about whether Aymes was an employee in that business. This factor will generally be of little help in this analysis, and it weighs negligibly in favor of Island in this case. 44 The discretion over when and how long to work is indeterminate since the district court found that Aymes had some degree of flexibility in his hours but that Island clearly had control over the project. The district court ruled that this factor is fairly evenly balanced between the parties. We agree. 45 The duration of the relationship is a similarly inconclusive factor. The district court found that the relationship between the parties extended over a long period of time, which indicates that Aymes was an employee. Although Aymes worked two years for Island, he did occasional work for others at the same time. Moreover, there were undisputed gaps in his employment, which suggests that he was not a full-time employee. The district court's finding is not clearly erroneous, but given the particular facts of this case this factor has only slight weight in Island's favor. 46 The location of the work was not specifically addressed by the district court. It is clear from the record, however, that Aymes did most of his programming at Island's offices, even if he did do some work at home. However, since Aymes was required to work in Island's offices in order to have access to its computer hardware, this factor should be accorded negligible weight. 47 Similarly, the source of the equipment carries little weight in the analysis. All the equipment Aymes used was located at Island's office. Again, however, the programming by necessity had to be performed on Island's machines. 48 The authority to hire assistants is also virtually meaningless in a situation where the hired party does not need assistants. 49 A review of this analysis shows that the significant factors supporting Island's contention that Aymes was an employee include Island's right to control the means of CSALIB's creation and Island's right to assign other projects. The significant factors supporting Aymes's argument that he was an independent contractor include: the level of skill needed to create CSALIB; the decision of Island not to offer him benefits; and his payment of his own social security taxes. The other factors were either indeterminate, because they were evenly balanced between the parties, or of marginal significance, because they were inapplicable to these facts. 50 Examining the factors for each side in terms of their importance, we conclude that the only major factor strongly supporting Island is that it directed the creation of the program. Island did reserve the right to assign Aymes other projects, which is a major factor, but under these facts this was not necessarily inconsistent with an independent contractor relationship. Supporting Aymes's argument that he was an independent contractor, however, are several important factors--his skill, and the tax and benefit factors--that outweigh the elements supporting Island. The other factors outlined in Reid are either indeterminate or of negligible importance, and cannot outweigh the significance we attach to Island's choice to treat Aymes as an independent contractor when it was to Island's financial benefit. Now that this treatment is no longer to Island's benefit, the company must still adhere to the choice it made. 51 On balance, application of the Reid test requires that we find Aymes to be an independent contractor when he was creating CSALIB for Island. Consequently, we hold that CSALIB is not a work for hire. Aymes therefore owns the copyright as author of the program.