Who Owns Work Made by a Contractor vs. an Employee in Canada?

You hired a developer to build your app, a photographer to shoot your product catalogue, or a writer to draft your website. You paid them. You assumed you own the result.

Under Canadian law, that assumption is wrong — at least when the work was done by an independent contractor, which is the situation for most freelancers and outsourced professionals.

IP ownership in Canada follows rules that surprise many Ontario business owners, and understanding who owns what is critical before you invest heavily in work you may not control.

The Default Rules Under the Copyright Act

Canada's Copyright Act sets out who owns copyright in two different scenarios:

Employees

When an employee creates a work in the course of their employment, the employer owns the copyright by default — unless there is a written agreement saying otherwise. The key phrase is "in the course of employment": work the employee does as part of their job duties, using the employer's resources, during working hours. If an employee creates something on their own time unrelated to their job, the employer has no automatic claim.

This rule reflects the employment relationship: the business directs the work, pays the salary, and bears the commercial risk — so the business gets the IP.

Independent Contractors and Freelancers

When an independent contractor creates a work for a client, the contractor (author) retains copyright by default — even if:

• You paid them in full.
• You provided detailed instructions and specifications.
• The work was created entirely for your use.

Payment does not transfer copyright. The work may have been made on commission, but Canada's Copyright Act — unlike the "work made for hire" doctrine in US copyright law — does not give the commissioning client automatic ownership just because they paid for the work.

What you typically receive, absent a contract saying otherwise, is an implied licence to use the work for the purpose for which it was commissioned. But that implied licence has limits. You may not have the right to:

• Modify or adapt the work.
• Use it for purposes beyond what was originally contemplated.
• Sub-license it to another party.
• Continue using it if the relationship breaks down.

Why This Gap Creates Real Business Risk

Consider a few scenarios:

Scenario 1 – The departed developer. You paid a freelance developer $30,000 to build your e-commerce platform. There is no IP assignment clause in your contract. The developer now owns the copyright in the custom code. You have a licence to run the software, but if you want another developer to modify or build on it, you may need the original developer's permission.

Scenario 2 – The logo you don't own. Your designer created your logo. No assignment clause. The designer moves on and sells a similar design to a competitor, or — in an extreme case — asserts copyright against you when you try to trademark the logo. Your trademark application lists you as the owner, but you may not actually own the underlying artwork.

Scenario 3 – The training materials. You paid a consultant to write a comprehensive training manual for your staff. No IP assignment. If you want to turn that manual into a paid online course, you may be creating a derivative work that requires the consultant's permission.

None of these scenarios is hypothetical — they play out regularly in small-business practice.

The Fix: A Written IP Assignment Clause

The standard solution is simple: every contract with an independent contractor that involves creative or technical work should include an IP assignment clause. A well-drafted clause typically:

• States that all work created for the client in connection with the engagement is the exclusive property of the client.
• Explicitly assigns all present and future copyright (and any other IP rights) in the work to the client.
• Requires the contractor to execute any further documents needed to perfect the assignment (e.g., signing a formal copyright assignment for a specific work).
• Includes a moral-rights waiver — even after copyright is assigned, the author retains moral rights under the Copyright Act unless they expressly waive them. Without a waiver, the author may object to modifications they find objectionable.

Software and Code: A Special Case

Software source code is protected as a literary work under the Copyright Act. The same contractor/employee distinction applies. If you outsource software development to a freelancer or agency, you need an explicit IP assignment or you may own only a licence to run the compiled application — not the underlying code.

For software-as-a-service businesses, a SaaS platform, or any business where technology is a core asset, this is not a minor technicality. A buyer of your business will want clean title to all IP, and undocumented or assigned-to-the-developer IP is a serious due-diligence red flag.

What About Work Done Abroad?

Many Ontario businesses hire contractors through international platforms. The IP ownership rules of the contractor's home jurisdiction may apply to the creation of the work. US "work made for hire" rules differ from Canadian law. Having a written assignment clause in your contract governed by Ontario law helps establish your rights regardless of where the contractor is located.

Employment Agreements and IP Provisions

Even for employees, the default rule — employer owns work created in the course of employment — may not capture everything you care about. Consider:

• Work created by an employee outside normal hours using their own equipment.
• Inventions or ideas developed partly at work, partly off-site.
• Background IP the employee brought with them from a previous job.

A tailored employment agreement with a comprehensive IP assignment and non-disclosure clause addresses these edge cases and protects the business more clearly than relying on statutory defaults alone.

Frequently asked questions