The video games industry has evolved rapidly over the last few decades. This boom in development, which is typical for the sector, has been met by legislation across most of Europe that was unprepared for the new challenges. Employment law, which has been designed based on more traditional employment environments like manufacturing, administration or sales, does not always fit well with the demands of video game producers. With this in mind, we have prepared for you a brief summary of the most frequent employment issues that come up in respect of the video game industry.

Independent contractors versus employees

First issue arises before the actual acquisition of the workforce and it relates to the never-ending debates regarding the status of the relationship. While most of companies prefer more flexible relationships, employees would like to get as much protection from the local laws as possible.

The conditions for hiring independent contractors instead of regular employees differ from country to country, and thus the risks they impose on companies will vary from jurisdiction to jurisdiction.

Usually, the degree of independence workers have in their daily tasks, plays a significant role in whether they can be engaged as independent contractors or must be hired as employees. The less independence the employee has, the more risks there are in hiring them as independent contractors.

The risk that a national authority would reassess an independent contractor relationship as an employment one very often depends on whether the employee (i) works during certain pre-agreed weekly hours (as opposed to the work being more project-oriented), (ii) works using the employer’s equipment (rather than their own), or (iii) uses the same processes or routines to fulfill work tasks (instead of it being more outcome-oriented, involving creative or unique processes).

In Slovakia, there are currently four criteria for assessing whether the work is being performed in an employment relationship instead of an independent contractor relationship:

1. There is a subordinate relationship between the employer and employee.
2. The employee personally performs the work.
3. Work is performed based on the employer’s orders and in the employer’s name.
4. Work is performed during working hours.

The first criterion is quite self-explanatory and alone does not do much for assessing the relationship, as even in independent-contractor relationships, the client typically has a “stronger” position. Therefore, it is quite difficult to differentiate between an employment and a contractual relationship based only on this point.

The criterion of “personal performance” is also quite tricky. Typically, when an individual is entering into the contractor relationship with the client (employer), the client has chosen this individual specifically for his/her personal performance.

Thus, the more decisive criteria are numbers 3. and 4.

With respect to criterion 3., it is essential that the employer (client) does not instruct the worker with exact daily or weekly orders on how to proceed, but rather sets out a framework and expected outcome for the work. Thus, for a contractor relationship, the work is rather project- or outcome-oriented. If this is not the case and the employer (client) regularly manages the work process on a daily or weekly basis, the relationship would be considered an employment one.

The organization of working time is the last criterion of dependent work typical in an employment relationship. Again, similarly to the previous criterion, if the employer (client) does not have a preference on how and when, exactly, the work should be done, but rather prefers to set certain milestones within the project and the final date of its handover, the risk of an assessment that the relationship is an employment one based on this criterion is minimized.

As you can see, there is no universal answer to this issue, and all the aspects specified above have to be carefully assessed on a case-by-case basis taking into account all criteria as an interconnected network of details between the parties.

Flexible forms of employment

The COVID-19 crisis escalated the need to regulate certain aspects of flexible working conditions, and the video games sector, as well as the entire IT sector in general, were the best prepared for the unprecedent situations employers faced at that time. One positive outcome of the crisis was that a number of European jurisdictions were prompted to improve their legal environment when it comes to working from home – often referred to as teleworking or home office.

The current energy crisis has made the share of costs for irregular home office work a hot topic. Each European country took its own approach, with some countries having discussions on the possibility of compensating irregular home office, as a way to enhance flexible working and ultimately save costs for the employer.

In Slovakia, shared costs are a statutory requirement only in cases of teleworking and permanent home office. Thus, employers are under no obligation to cover expenses of employees working from home only occasionally (irregular home office) instead of their usual workplace. Such obligations should be addressed in individual employment contracts, internal policies or collective bargaining agreements.

Restrictive covenants – noncompete clauses

One typical condition to be agreed with employees in employment contracts (especially with those in managerial positions) are restrictive noncompete clauses, with obligations during and after employment. In many European jurisdictions, the obligations stemming from a noncompete clause can remain valid after an employment’s termination (for whatever reason), provided that the ex-employee is fairly remunerated for this contractual covenant.

When drafting the noncompete clause, the employer must pay closer attention to the coverage of protection – i.e., what is actually being protected. In Slovakia (and similarly also in other CEE jurisdictions), the law usually only protects typical noncompetitive behavior of the former employee. This relates to protecting the employers’ primary activity (e.g. the employee cannot take the employer’s customers or a part of the business).

This means that any other protection of the employer’s rights can be quite problematic from an enforcement point of view. They include:

1. Non-solicitation – where the former employee is prevented from contacting the employer’s customers;
2. Non-dealing – where the former employee is prevented from providing goods or services to the employer’s customers;
3. Non-poaching or non-employment – which stops the former employee from poaching or em-ploying other staff members.

Please note that in former communist European countries, the courts sometimes tend towards protecting employment rights even more than is necessary and therefore the protection of employers may be limited in this respect.

Intellectual property clauses

When it comes to the protection of intellectual property rights, the employer must be absolutely clear on the relationship between the company and worker (whether he/she is an employee or an independent contractor – as explained above in point 1. The “work for hire” concept may well be considered an employment relationship in many European jurisdictions, but the same may not be the case if the relationship can be demonstrated to fall outside employment (subscribing to an independent contractor model).

With respect to copyright, in Slovakia, the Copyright Act (Section 91, Subsection 4 on “Commissioned Work”) stipulates that the provisions in the Act on employee work also apply to the copyright created in an independent contractor relationship. This practically means that there is basically no difference whether the work is done in an employment relationship or on the basis of an independent contractor model, from this point of view.

If this, however, is not the case in your jurisdiction, copyright ownership and related issues should be clearly addressed in the contract with the independent contractor.

Other main areas to be covered in employment contracts

Other usual provisions that workers request in this sector often relate to more flexible working conditions. These are typically longer vacations (above the statutory minimum), alternative workplaces, higher severance payouts and shorter notice periods for terminating the work relationship.

The contractual will of the parties allows most of these typical provisions to be agreed in the contract – whether the nature of the relationship is an employment or independent contractor model. The only problematic condition might be honoring requests for a shorter termination period, if the provisions of the Slovak Labor Code apply to the established relationship. Section 62, Subsection 2 of the Slovak Labor Code stipulates that “the termination period is at least one month, unless otherwise specified in the Labor Code.” Thus, any deviation from the statutory minimum termination period could be quite problematic.

As already explained above, this issue does not exist in an independent contractor relationship, and the parties are free to agree shorter termination periods within their contract.

Conclusion

As can be seen from the above, the video game sector faces quite specific employment issues as compared with others. Although governments are well aware of the issues – and despite movement by lawmakers across Europe to adapt the legal environment to the current needs of industry players – the playing field is changing so quickly that the result is a game of constant catch-up, and the feeling is that we are chasing our own tails. That said, European governments remain willing to find suitable solutions for businesses and their needs, despite the sometimes rigid nature of the regulatory environment.

Author of the article:

Stanislav Ďurica, Partner, Bratislava, Slovakia

More insights together with some numbers and statistics in our Video games industry report.