The Green Room - Employing actors at local theaters

Mar 30^th, 2009 at 12:01pm

No one important Offline
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So I'm looking for opinions on the widespread (nationally and locally) practice of hiring actors as independent contractors.

There are significant benefits to actors and corresponding costs to theaters when actors are hired as employees not independent contractors. The IRS and the US courts have often found that actors should be treated as employees for tax and benefit purposes. But most community theaters in Utah probably can't afford to hire actors as employees. Legally, these theaters should probably use volunteers without paying them, but could reimburse for expenses. It's probably not legal for most theaters to hire actors as independent contractors.

For me, the problem is that I think many actors would agree that getting paid as an independent contractor is better than not getting paid and trying to require theaters to employ actors would mean that many theaters would either have to only use volunteers or stop operating. So there's no real incentive for actors to try to change the situation.

Should theaters be required to follow the law and IRS regulations? Would local actors be better off if theaters did so? Should actors just leave things as they are to maintain their current pay?

What do you all think?

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Reply #1 - Mar 30^th, 2009 at 12:41pm

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No one important wrote on Mar 30^th, 2009 at 12:01pm:

So I'm looking for opinions on the widespread (nationally and locally) practice of hiring actors as independent contractors.

There are significant benefits to actors and corresponding costs to theaters when actors are hired as employees not independent contractors. The IRS and the US courts have often found that actors should be treated as employees for tax and benefit purposes. But most community theaters in Utah probably can't afford to hire actors as employees. Legally, these theaters should probably use volunteers without paying them, but could reimburse for expenses. It's probably not legal for most theaters to hire actors as independent contractors.

For me, the problem is that I think many actors would agree that getting paid as an independent contractor is better than not getting paid and trying to require theaters to employ actors would mean that many theaters would either have to only use volunteers or stop operating. So there's no real incentive for actors to try to change the situation.

Should theaters be required to follow the law and IRS regulations? Would local actors be better off if theaters did so? Should actors just leave things as they are to maintain their current pay?

What do you all think? �

I think this question is long, wordy and not quite making too much sense (at least to me). Also, I think you have forgotten to take into account that most theaters have a "not-for-profit" status, which changes the employer-employee relationship in the eyes of the IRS.

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Reply #2 - Mar 30^th, 2009 at 12:59pm

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Sorry for the wordiness and lack of clarity.

I have considered the nonprofit nature of the theaters though I didn't talk about it. The IRS has still often found that nonprofit theaters should treat actors as employees. But I'm just interested in opinions. Because the IRS could be wrong.

So let me ask a different question: Do you think theaters should always be able to hire actors as independent contractors?

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Reply #3 - Mar 30^th, 2009 at 1:06pm

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Just moved this to a more appropriate forum. Local Theatres is more specific in nature, General Theater is ... well, general.

Anyways, I don't understand the IRS finding. Seems to me that an independent contractor is the correct way to handle actor employment. It's not permanent or even seasonal employment ... it is project-based. Seems like an idea situation for the user of the 1099.

But I'm no lawyer or HR person. I'd need to understand the logic behind the assertion that actors should be hired as employees.

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Reply #4 - Mar 30^th, 2009 at 1:22pm

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Sorry about the original misclassification. It was a general question about local theater.

So in general, when a hirer has the right to control the way that work is done and not just the result of the work, then the relationship created is an employer-employee relationship. Thus, for actors specifying the time and place of the work, what the performer does, the direction provided by the director or stage manager, the general understanding (or contractual requirement) that actors can't change the performance after it is set, etc. all suggest an employer-employee relationship. Additionally, when the hirer provides the facilities and other tools required to do the work, this also generally points to an employer-employee relationship. Since theaters provide the stage, often costumes, lighting, additional staff, music, scripts, etc, this suggests an employer-employee relationship.

However, as you point out, the duration or expected duration of the relationship is also a factor. That makes the situation more complicated for theaters and actors. The short-term, project-based nature of the work does suggest an independent contractor relationship.

The real question is whether the short-term, project-based nature of the relationship should carry more weight than the right to control the work that the theater possesses. Interestingly (to me anyway), in one case a voiceover actor who worked for a total of two hours was deemed an employee because of the right to control maintained by the producer. Similarly, the IRS has often weighed the right to control over the duration of the relationship and found actors to be employees in many situations.

But it is precisely the fact that actors have some of the characteristics of employees and some of independent contractors that makes the issue so complicated.

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Reply #5 - Mar 30^th, 2009 at 2:18pm

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Interesting. I think the practicality of hiring actors as employees is problematic. Would they be employees without benefits? Or would you have to enroll, unenroll, and reenroll them in benefits each time you hire them for an 8-week gig? Or would they still get benefits through AEA? What if they're not AEA actors? If they would still get their benefits through AEA, then I have a hard time seeing how hiring them as employees would be a better situation than how they are hired now. For anybody.

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Reply #6 - Mar 30^th, 2009 at 2:45pm

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Theatres would face significant administrative and financial burdens if required by the law to hire actors as employees. But the choice of whether to grant benefits would remain with the theatre. But since most part-time employees don't receive benefits in any industry, it is hard to imagine theaters granting part-time actors benefits. Most actors who receive benefits, as far as I know, are AEA. But there are special benefit plans that exist for these types of unusual employment situations. I don't think AEA administers benefits for non-AEA employees.

Theaters would be required to pay payroll taxes and withhold taxes, generally they would be required to pay minimum wage and overtime, and they would have to contribute to unemployment insurance. This would have to be managed for every actor employed. Of course, all Equity houses, including the nonprofit ones, have to do this for the Equity actors they employ so it is doable. But, with the little I know about the Eqyptian's situation, it seems that is a demonstration of the costs of hiring actors as employees as required by Equity.

On a slightly different topic, the idea of independent contractors is that they operate a business by performing their trade or profession. Since it is commonly acknowledged that community theater actors perform for the love of performance and not the money, they can't be considered as operating a business. Thus, they should either be treated as volunteers or employees. But this would vary by individual actor, as I suspect there are some actors in the state who work as independent contractors for theaters and are actually trying to operate as a business. Nevertheless, if the theater controls the way the work is performed the IRS would likely find an employer-employee relationship.

The following is from an IRS training publication on the entertainment industry for auditors:

"The majority of entertainers and technicians are employees and will receive a Form W-2 with Federal income tax and FICA tax withheld. The extent of control a studio or production company has over an entertainer continues to be the determining factor in classifying an individual as either an employee or an independent contractor. �

Treas. Reg. section 31.3401(c)-1(b) states in part:
Generally, the relationship of employer and employee exists when the person for whom services are performed has the right to control and direct the individual who performs the services, not only as to the result to be accomplished by the work but also as to the details and means by which that result is accomplished. * * * "
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Reply #7 - Mar 30^th, 2009 at 2:56pm

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Just in case anyone wants to go through the great sport of reading statutory language (and I know I do....), here are the relevant portions of the Utah Workers' Compensation Act:

U.C.A. �34A-2-103. Employers enumerated and defined � Regularly employed � Statutory employers.

(2) �As used in this Subsection (2):
(a) �Independent contractor� means any person engaged in the performance of any work for another who, while so engaged, is:
(i) independent of the employer in all that pertains to the execution of the work;
(ii) not subject to the routine rule or control of the employer;
      (iii) engaged only in the performance of a definite job or piece of work; and
      (iv) subordinate to the employer only in effecting a result in accordance with the employer�s design.

�Definite job� test.

The �definite job� test is not helpful unless it is taken in connection with other factors or limited to jobs such as are usually done by outside parties in pursuance of their independent callings, such as construction of buildings or some job not in the line of the employer�s business, but something which he finds necessary or desirable in the furtherance of his business. Parkinson v. Industrial Comm�n., 172 P.2d 136 (Utah 1946).

Employee and independent contractor.

Agent can be �employee� for limited purpose and �independent contractor� for other purposes. Christean v. Industrial Comm�n., 196 P.2d 502 (Utah 1948).

Subcontractor, who was both owner and employee of his business, was considered employee of general contractor for workers� compensation purposes where metal work done by subcontractor was part of process in general contractor�s business, and where general contractor had substantial right, under the arrangement, to control the subcontractor�s work. Pinter Constr. Co. v. Frisby, 678 P.2d 305 (Utah 1984).

Where, under the express terms of their agreement, a constructions company retrained and systematically exercised the right to direct the performance and execution of work of the subcontractor, to exercise its full discretion with respect to the work, to control which workmen were used, to fire subcontractor�s employees for any reason, to monitor the work on a daily basis, and to dictate the hours and days of work, the subcontractor acted as an employee, not an independent contractor. Utah Home Fire Ins. Co. v. Manning, 985 P.2d 243 (Utah 1999).

Independent contractor defined.

An independent contractor is one who is under contract to render service or do work for another according to his own method, means, and manner of doing the work and without being subject to the control, direction, or supervision of such other, except as to the result of the work or service. Stricker v. Industrial Comm�n., 188 P. 849 (Utah 1920).

Relationship of employer and employee.

Test of employment relationship is whether employer retains supervision and control of work to be performed, and this rule is not limited in its application to cases involving distinction between employee and independent contractor. Weber County-Ogden City Relief Comm. V. Industrial Comm�n., 71 P.2d 177 (Utah 1937)

Fundamental test of employer-employee relationship is right of control. Auerbach Co. v. Industrial Comm�n., 195 P.2d 245 (Utah 1948).

Where �independent contractor� had no choice of the terms of his truck lease, drove a truck owned by lessor, hauled only loads that had been approved by his supervisor, was not free to refuse a load, was obliged to travel a certain route, and operate a certain number of miles per month at a specified speed, there was reasonable basis for conclusion of the commission that plaintiff was an employee within the meaning of the workmen�s compensation statute. Harry L. Young & Sons v. Ashton, 538 P.2d 316 (Utah 1975).

U.C.A. �34A-2-104. �Employee,� �worker,� and �operative� defined.

(1) As used in this chapter and Chapter 3, Utah Occupational Disease Act, �employee,� �worker,� and �operative mean:

(b) each person in the service of an employer, as defined in Section 34A-2-103, who employs one or more workers or operatives regularly in the same business, or in about the same establishment:
(i) under any contract of hire;
   (A) express or implied; and
   (B) oral or written;
(ii) including aliens and minors, whether legally or illegally working for hire; and
      (iii) not including any person whose employment:
   (A) is causal; and
   (B) not in the usual course of the trade, business, or occupation of the employee�s employer.

Employee.

The statutory definition adds nothing to generally accepted definition of �employee,� who is defined as one who works for and under control of another for hire. Stricker v. Industrial Comm�n., 188 P. 849 (Utah 1920).

An employee is a person hired to work for wages as the employer may direct. Bingham City Corp. v. Industrial Comm�n., 243 P. 113 (Utah 1920).

Establishment of relationship.

Test of employer-employee relationship is right of control. Auerbach Co. v. Industrial Comm�n., 195 P.2d 245 (1948).

As I read the statutes and cases, although the duration of the job and the method of payment are factors, the key factor is control over the work.

My skills are as varied as they are impractical.

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Reply #8 - Mar 30^th, 2009 at 3:01pm

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To me, it's more a question of liability than of benefits or payroll. If the actor is an independent contractor, the theater's liability is greatly reduced (remember, I work for attorneys who deal with workers' compensation issues all the time).

The problem is that courts will generally rule that paid actors are considered employees, because of the control issue.

My skills are as varied as they are impractical.

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Reply #9 - Mar 30^th, 2009 at 3:17pm

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Thanks Professor. I do love reading statutory language.

I think one of the problems in this area, as pointed out by your first post, is that whether one is an employee or independent contractor depends on the law or regulation at issue. The IRS makes determinations for Federal tax purposes. The state makes determinations for worker's compensation. The courts and other agencies make determinations regarding the Fair Labor Standards Act and the National Labor Relations Act. And they all use similar but distinct tests.

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