If you are you might want to get up to speed on the latest changes to Californian employment law. It may just affect how you negotiate your gigs!
California has just amended its law with regards to the classification of independent contractors and employees and it is going to have a massive effect on the way artists collaborate in the entertainment industry, not to mention workers in other industries.
The Californian Supreme court has stated the misclassification of workers has led to the, “erosion of the middle class and rise of inequality,” in the United States and as such has made a dramatic move to amend the classification of workers.
Under section 2750.3 of the newly amended Labor code, a person providing labor or services for remuneration shall be considered an employee rather than an independent contractor unless the hiring entity demonstrates that all of the following conditions are satisfied:
(A) The person is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact.
(B) The person performs work that is outside the usual course of the hiring entity’s business.
(C) The person is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.
This major amendment is designed to provide greater work place protections to independent contractors who should be recognised under the law as employees. Additionally, it will add to the State’s payroll tax revenue by an expected 7 billion dollars, with companies being ordered to pay worker’s payroll taxes, payment of premiums for worker’s compensation, social security and unemployment and disability insurance. By classifying workers as independent contractors rather than employees, companies have been able to avoid these costs until now.
So isn’t greater protection of artists a good thing, I hear you say?
Sessional musicians work as independent contractors on records. They are often employed for the purpose of bringing different sounds and shades of music to recordings. Talent, including voice over artists and actors, are employed as independent contractors on film projects. The entertainment industry depends on independent contractors and freelancers – it is how artists ultimately collaborate to bring a recording or film to life! Not only that, but almost every crew member you meet, from producers, to engineers, tour managers and roadies, all work as independent contractors on projects.
Under this new legislation, independent contractors will be considered employees of the company. Companies will therefore be required to provide various unemployment and disability insurances, minimum wage and overtime – costs that many companies simply cannot afford or wish to avoid.
As such, it is concerning law for independent artists and labels. These extra employment costs may discourage many record producers not to hire musicians or touring musicians given the costs involved. It may discourage film companies from employing independent artists. With stiff penalties of $25,000 for violating this law, many companies will be treading carefully when it comes to the employment of artists under this new law.
We’ve discussed how it will affect companies however what about artists themselves? Remember how you used to be able to deduct business expenses for projects? Well that may become a thing of the past under the new law. Not only that, but talent will receive a 20% higher tax rate. Starving artist come to mind?
Accountants, Business Managers and Agents are not exempt from this rule either and if they encourage misclassification, they are equally liable.
Removing the ability to freelance is something the creative industries cannot afford to lose.
The workforce in general cannot afford to lose independent contractors, from Uber drivers to retail workers!
It will become important for businesses and artists moving forward, to seek proper legal advice with regards to these new changes. How will they affect your business opportunities and contracts?
Should you require further information on this, please do not hesitate to contact our friendly lawyer, Rebekah O’Sullivan.