

Co-founder holds source code hostage - big legal fight over copyright ownership - dctoedt
http://hoviblog.blogspot.com/2010/05/tech-startup-nightmare-on-my-street-how.html

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tptacek
I can't tell whether this article wants me to sympathize with JustMed, talking
as it does about the "bitter irony" of their contractor/employee's standing to
sue them for failing to honor employment obligations. These people brought on
an engineer, who was apparently solely responsible for developing the core IP
of the company, paying him for years only in stock. When they eventually
deigned to pay him, they didn't withhold taxes.

The word for someone who performs a core company role in exchange for nothing
but equity is "cofounder".

The word for someone who is paid to do work but who is responsible for all
their own taxes is "contractor".

It freaks me out that the Appeals court decided that these factors weren't
"dispositive" of the engineer's relationship with the company, because (pp)
"that's how startups work". The hell it is. If you want people to work for
you, you get an employment contract together. If they're employees, you pay
them, and you do W2 withholding.

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starkfist
_The hell it is. If you want people to work for you, you get an employment
contract together. If they're employees, you pay them, and you do W2
withholding._

The engineer in question was married to the founder's sister, and she died.
Obviously there was a lot of personal relationship intertwined into the
business relationship. In addition, there's a traumatic event in the lives of
both the founder and the engineer. This probably meant there was no real
contract, thus judges could swing in favor of either one of them. Your comment
makes it seem like this is a typical business vs. the contractor case, which
it isn't.

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ahoyhere
The IRS doesn't care if there's an agreement, when it comes to determining
employee vs contractor. The rules are very clear:

[http://www.irs.gov/businesses/small/article/0,,id=99921,00.h...](http://www.irs.gov/businesses/small/article/0,,id=99921,00.html)

~~~
wglb
Well, they are spelled out, but there is still a lot of unclarity in the
execution of these rules. Enough so that some large consumers of contractors
make everyone go through another consulting organization.

As an example, the phrase _Does the company control or have the right to
control what the worker does and how the worker does his or her job?_ seems a
bit open to interpretation. Lets say you are a contractor working on a BFE
Java or .net application. The project has its source control rules, its status
reporting rules, its code convention rules, and all are likely under the
control of an employee of the company in question. Sounds like the company has
the right to control in this very common case.

So I argue that the rules may be extensive, but they are not very clear.

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ajg1977
The company is lucky they aren't located in California. Here, even if you are
identified as an employee, you may retain ownership over works you have
created unless you have signed a "work for hire" agreement or something
similar.

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tptacek
This is a great point and is the reason why most established companies have a
_standard contractor agreement_ that they _never change_ that has a work-for-
hire clause, along with the NDA and IP language, and a formal statement of
work that specifies payment schedule and acceptance criteria.

