Computerworld reports on an employment dispute involving a web developer:
The case, heard by the Employment Relations Authority late last year, hinged on whether Michael Oliver, who did development work for Palmerston North firm Autoweb Solutions, was an employee or a contractor. The Authority determined he was an employee.
The employee/contractor distinction is an important one, and has been the source of a number of court disputes. While the Autoweb case was simply a wage dispute, the employee/contractor distinction could also potentially have intellectual property implications.
The default position under section 21 of the Copyright Act is that (most) copyrightable works created by an employee “in the course” of employment – e.g. software – are owned by the employer (whether or not the employee is actually paid). This is not the case if the person creating the work is a contractor. In that case, the so-called commissioning rule applies (see Copyright ownership and software development). If a developer had been “hired” (as an employee or contractor) to write some specific code, then the employer/hirer will likely have commissioned the work and will therefore own in.
But the situation could easily become more murky, with the possible result that a non-employee developer owns copyright in code they produced for their principal (though not in a “commissioning” situation) – for an example, see “Free design” and the commissioning rule. This cuts both ways: contractors should be careful not to be deemed employees in order to avoid the risk of IP created in the course of a project being inadvertently owned by their “employer”. Note that the words “in the course” are important, as discussed in the recent ERA case of Abbott v Chief Executive, Whitireia Polytechnic  NZERA 766.
As is often the case, a proper contract is the answer – though as the Autoweb case makes clear, it is the substance of the relationship not the labeling of it that is determinative. In the case of employees, it is a legal requirement that there be a written employment contract. Contracts with contractors should clearly state which party retains any resulting IP.