[Dixielandjazz] MUSICIANS - EMPLOYEES OR INDEPENDENT CONTRACTORS?

[Steve Barbone]

For those who were concerned recently about employee status, ve. independent
contractor status of musicians in the band. Long, interesting to them, maybe
not to the rest of the list so delete if it bores you.

Article by Attorney Leonard Leobowitz, AFM-SSD Counsel. He is well regarded.

AFM means American Federation of Musicians
SSD means Symphonic Services Division

Note especially that even if your band members sign an "independent
contractor" contract, it may not necessarily hold up in a court of law.
On the other hand, see the 1st paragraph which states that in most cases,
every musician is a free lance independent contractor. That is the basic
rule, regardless of how much control the band leader may exert over the
music performance of the musician.

Note also, this article is written by Union Counsel.

Cheers,
Steve Barbone


LEGAL STATUS OF MUSICIANS  EMPLOYEES  VS.  INDEPENDENT CONTRACTOR

³What¹s it all about?²  - by Leonard Leibowitz  AFM-SSD Counsel

At some point in their careers, most musicians will face the issue of their
legal status, i.e. are they ³employees² or ³independent contractors²? The
issue is not unique to musicians, but it is endemic in the performing arts
and entertainment field. Unless one is employed year-round by a single
employer, e.g. a major symphony orchestra, virtually every musician is a
free lancer, working for numerous employers for periods of time as short as
one night or as long as months or, as in the case of a hit Broadway Show,
years. 

Because free lance employment resembles independent contracting in many
ways, it is not always clear which is which. Would-be employers are far
better off economically dealing with independent contractors rather than
employees. They often try to treat free lance employees as independent
contractors, if they can get away with it. And, because certain features of
independent contractor status are attractive in the short term, at least to
many musicians, and others in the arts and entertainment, they too are happy
to accept such treatment. To further complicate matters, there is no
single, uniform legal definition of terms, and even when the same definition
is utilized, each state, and sometimes various agencies within each state,
has the ability to make its own determination of the applicability of the
definition to the facts of each case!

In a probably vain attempt to clarify some of this mess, I shall try to walk
you through the general terms, definitions, issues and differences, and what
they mean to you. 

First, some definitions and distinctions.
The primary distinction between employee and independent contractor is, as
you would imagine, that which is used by the Internal Revenue Service, and
is often referred to as the ³control test². Quoting from a recent IRS letter
ruling dealing with the issue, the test was set forth as follows:

Generally, the relationship of employer and employee exists when the person
for whom the services are performed has the right to control and direct the
individual who performs the services not only as to the results to be
accomplished by the work, but also as to the details and means by which the
result is accomplished. That is, an employee is subject to the will and
control of the employer not only as to what shall be done, but also as to
how it shall be done. In this connection, it is not necessary that the
employer actually direct or control the manner in which services are
performed; it is sufficient if he or she has the right to do so. In general,
if an individual is subject to the control or direction of another merely as
to the result to be accomplished and not as to the means and methods for
accomplishing the result, he is an independent contractor.

And, from that same letter, If the relationship of an employer and employee
exists, the designation or description of the parties as anything other
than that of employer and employee is immaterial. Thus, if an
employer/employee relationship exists, the designation of the employee as .
. . an independent contractor must be disregarded. Thus, the fact that some
employers require musicians to sign contracts in which they ³admit² to being
independent contractor, is not in and of itself, determinative.

In determining whether an individual is an employee or an independent
contractor under the common law, all evidence of both control and lack of
control or autonomy must be considered. In doing so, one must examine the
relationship of the worker and the business. Facts which illustrate whether
there is a right to direct or control how the worker performs the specific
tasks for which he or she is hired, whether there is a right to direct or
control how the business aspects of the worker¹s activities are conducted,
and how the parties perceive their relationship provide evidence of the
degree of control and autonomy. The consequences of this determination are
always serious. 

On the one hand, if one is found to be an independent contractor, he or she
will not be subject to federal or state tax withholding, and will thus
receive payment without deductions. It is this aspect of that status that
attracts some musicians. In addition, independent contractors are basically
the owners of a business and thus they are able to take a number of tax
deductions and/or exemptions which are not available to employees.

On the other side of the ledger are the following benefits of being treated
as en employee, which are not available to an independent contractor:

1. Union representation. The National Labor Relations Act, and every state
labor act (in states that have one) limits coverage to ³employees² only.
Thus, the protections of the Act, and the availability of the NLRB to
enforce them, are not there for ³independent contractors². No employer need
recognize a union of independent contractors, and if an employer does so
voluntarily, that recognition can be withdrawn at any time. Should an ³
independent contractor² file an unfair labor practice charge, it will be
dismissed for lack of jurisdiction.

2. Unemployment Insurance. These out-of-work benefits are likewise limited
to employees and not independent contractors. The same is true of Workers
Compensation and Disability Benefits. In New York State, by statute, all
performing artists, and others in the field, are automatically deemed to be
employees for the purposes of Unemployment Insurance, Disability benefits,
and Workers Compensation. Since there are no such statutes in other states,
the issue of one¹s status is subject to local interpretation on an ad hoc
basis. In a recent case in Florida (where else?), a musician who worked for
a number of symphony orchestras was recognized by IRS as an employee,
thereby requiring his employer to withhold taxes, but was found to be an
independent contractor by the Florida Unemployment Insurance Board, and
therefore, ineligible for benefits‹the worst of all possible worlds!

3. Pension and Health Insurance. If an independent contractor is denied
union representation, he or she may thereby also lose the ability to attain
participation in Union-sponsored Pension and Welfare plans paid for by
employer contributions. And, although independent contractors may purchase
health insurance and even a pension plan, they are both very costly even if
one can take a tax deduction for some of the cost.

4. Job Security. With the exception of the anti-discrimination laws which
may provide some protection in some cases for independent contractors as
well as employees, there is no broad and all-encompassing job security
available to anyone which equals that of a union contract. This is true
whether that protection covers alleged misconduct, i.e. absenteeism,
insubordination, etc. (³just cause²) or alleged musical deficiencies
(³non-renewal²). Union contracts almost always provide the right of
an employee to challenge a dismissal before some impartial arbitrator or
other agency, and be provided with Union representation often with legal
counsel, free of charge.

5. Fair Labor Standards Act. Here again, the federal statute providing
minimum job protections, e.g. mandatory payment of overtime, safety
regulations, etc. are available only to employees‹not independent
contractors. Other benefits of employee status, and the consequent benefits
of union membership and participation in union affairs are too numerous to
mention. But the moral of the story is for musicians to think carefully
about their status‹where one has a choice‹and to consider the longer term
advantages of employee status versus that of independent contractor. If you
are unsure of your status, or if you are being treated as an independent
contractor but believe that you are not, call your local union or the AFM
and seek advice. It¹s free for employee members