Agency Subcontract: Who Owns the Work, Me, the Agency or the End Client?

The starting rule: the creator owns it

Under US copyright law, the person who creates a work owns the copyright unless one of two things applies. The first is that the creator is an employee acting within the scope of the job, in which case the employer owns it. The second is that the work is a "work made for hire" under a written agreement, which for independent contractors only works in nine specific categories of work. Outside those two routes, ownership only moves by a written, signed assignment.

That means that as a freelancer, you start as the owner. The agency cannot promise its client ownership of your work unless you have first given the agency the rights to pass on.

How does the ownership chain work in agency subcontracts?

In a typical agency setup there are two contracts. The client signs a master services agreement with the agency, which often says the client will own all deliverables. The agency then signs a subcontractor agreement with you, which should include an assignment from you to the agency, or directly to the end client, so that the agency can keep its promise.

If any link is missing, the chain breaks. An agency that promised ownership to its client without getting an assignment from you is exposed, and it will usually try to fix that by asking you to sign something later, often after a dispute has started.

• Client to agency: the agency promises the client ownership of the deliverables, often on payment.
• Agency to you: you assign your rights to the agency so it can pass them on.
• Sometimes you assign directly to the end client, named in your contract as a third-party beneficiary.
• Sometimes the agency keeps ownership and grants the client a licence instead.

Why "work made for hire" wording may not do what it says

Many subcontractor agreements say "all work is work made for hire." For a freelancer, that label only works for commissioned works in the statutory categories, such as a contribution to a collective work, part of an audiovisual work, a translation, a compilation, instructional text, a test, answer material, a supplementary work or an atlas. A website design, a logo or most software does not fit neatly into those categories.

Well-drafted contracts deal with this by adding a backup assignment: if the work is not a work made for hire, the freelancer assigns all rights anyway. That backup is what actually transfers ownership in most cases, so read it carefully. Note also that in California, a contract calling a contractor's work "made for hire" can have employment-law consequences, which is one reason some agencies avoid the phrase.

The clause that matters most: when ownership transfers

The single most important question is when your rights move. Compare these two triggers:

Agencies are often paid by their clients on long terms and pay subcontractors after they collect. If ownership passes on creation, the agency and client can use your work while your invoice sits unpaid, and you have lost your strongest lever. If ownership passes on payment, using the work before paying for it is using work you still own, which gives you a copyright claim as well as a contract claim.

• "Upon creation": rights transfer the moment you make the work, before any invoice is paid.
• "Upon full payment": rights transfer only when you have been paid in full for that work.

What is the difference between pay-when-paid and pay-if-paid?

Subcontracts often tie your payment to the agency being paid. A "pay-when-paid" clause usually only delays payment until the client pays or a reasonable time passes. A "pay-if-paid" clause tries to shift the whole risk of client non-payment onto you: if the client never pays, neither does the agency. Courts in some states read these narrowly or refuse to enforce them, but you should not rely on that. Ask for a fixed payment date, such as 30 days after your invoice, regardless of when the client pays.

How do courts treat pay-if-paid clauses?

Most of the case law comes from construction, where subcontracts have used these clauses for decades, but the interpretation rules are ordinary contract law. The leading case is Thos. J. Dyer Co. v. Bishop International Engineering Co., 303 F.2d 655 (6th Cir. 1962). A subcontract said payment was due after the owner paid the general contractor; the owner went bankrupt. The court read the clause as a timing provision giving the contractor a reasonable time to collect, not as a condition that shifted the risk of the owner never paying. Most courts since have required clear and unambiguous wording before treating a clause as true pay-if-paid, and read doubtful wording as pay-when-paid.

Some states go further. New York's Court of Appeals held in West-Fair Electric Contractors v. Aetna Casualty & Surety Co., 87 N.Y.2d 148 (1995), that a clause shifting the risk of owner non-payment to a subcontractor is void under Lien Law § 34, because it amounts to a waiver of lien rights, while a clause that only sets the timing of payment remains valid. California reached a similar result in Wm. R. Clarke Corp. v. Safeco Insurance Co., 15 Cal.4th 882 (1997). Both decisions turn on mechanic's lien rights, which a designer, writer or developer working for an agency usually does not have, so they may not help you outside construction.

The safest course is still the one above: a fixed payment date in your own contract. If the agency insists on linking your payment to the client's, ask for an outer limit, such as payment within 60 days of your invoice whether or not the client has paid.

Your pre-existing tools, templates and code

Assignments are often written to cover "all work product," which can sweep in code libraries, templates, presets, fonts you licensed and design systems you built long before this project. Carve these out. The usual approach is that you keep ownership of pre-existing materials and grant the agency and its client a non-exclusive, perpetual licence to use them as part of the deliverables. List the materials if you can.

Portfolio rights and credit

End clients sometimes forbid any public mention of the work, and the agency passes that restriction down to you. If you want to show the work, negotiate for a portfolio right: the ability to show the work after launch, without confidential information, and perhaps only in a private portfolio. White-label agency work often means no public credit at all, so agree this upfront rather than assuming it.

A worked example

Priya, a freelance developer, builds a booking app for an agency serving a restaurant group. Her subcontract says all work is work made for hire and she assigns all rights on creation. The restaurant group pays the agency late, and the agency stops paying Priya, citing a pay-if-paid clause. The app is live and in use.

Because rights passed on creation, Priya cannot argue the restaurant group is using her work without permission. Her only claim is for breach of contract against the agency, and the pay-if-paid clause complicates it. Had her contract said rights transfer on full payment, with a fixed 30-day payment term, she would have had a contract claim for the invoice and leverage over the continued use of code she still owned.

Sample wording you can propose

"All rights in the Deliverables will be assigned to Agency, or to the Client as Agency directs, upon Agency's payment in full of the fees for those Deliverables. Until then, Agency and Client have a limited licence to review and test the Deliverables only. Contractor retains ownership of its pre-existing materials and grants a non-exclusive, perpetual licence to use them as incorporated in the Deliverables. Fees are due 30 days after invoice regardless of payment by the Client."

Common mistakes

• Assuming the end client's contract terms bind you. They generally do not, unless your subcontract incorporates them.
• Signing an assignment "on creation" while accepting long or conditional payment terms.
• Leaving your pre-existing code, templates or presets inside the assignment.
• Not checking whether the subcontract incorporates the master agreement, including its indemnities.
• Agreeing to white-label terms without a portfolio right you actually wanted.

Quick checklist

• Who receives the assignment: the agency, the client, or both?
• Is ownership triggered on creation or on full payment?
• Is there a pay-if-paid or pay-when-paid clause?
• Are pre-existing materials carved out and licensed instead?
• Does the subcontract incorporate the client's terms or indemnities?
• Do you keep any right to show the work?

Key terms explained

These are the terms you are most likely to meet in an agency subcontract.

• Assignment: a written transfer of ownership of rights from you to someone else.
• Work made for hire: a legal category where the commissioning party owns the work from the start; for contractors it only applies to certain works and needs a signed agreement.
• Licence: permission to use work you still own, which can be exclusive or non-exclusive, limited or perpetual.
• Flow-down clause: wording that passes the client's contract obligations down to you.
• Pay-if-paid: a clause that makes your payment conditional on the agency being paid.
• Pre-existing materials: tools, code and templates you owned before the project.

Before you sign

Agency work can be steady and well paid, but the ownership chain is where freelancers lose money. Ask for a copy of any terms that are incorporated into your contract, move the transfer of rights to payment, and carve out your own tools. If you want a second opinion, upload the subcontract and have the ownership, payment and flow-down clauses flagged before you sign.