Welcome to AccelPro Employment Law, where we provide expert interviews and coaching to accelerate your professional development. Today we’re featuring a conversation about worker classification in the entertainment world. Our guest is Anthony Panebianco, a Senior Associate at DarrowEverett.
Classifying workers is complicated enough. In the entertainment world, it is made more difficult because many performers would rather be classified as independent contractors even though the law says they should be employees.
Panebianco has a good deal of personal experience with this issue. As a classically trained pianist, he is a performer himself. As chair of the Cape Symphony, he often hires performers. And as an attorney, he has many creatives and performers for clients.
He describes the pitfalls, and how to avoid them, for companies wishing to hire entertainers and for entertainers looking to land gigs.The supplemental materials and episode transcript are available below.
Anthony Panebianco’s DarrowEverett profile
2:38 | Adams, Andrew and Panebianco, Anthony. (2023, April 26). The Show Must Go On: Entertainer-Employee Classification Takes Center Stage for Venues. JD Supra.
10:33 | Guidelines for Determining Worker Status Performing Artists. New York Department of Labor (2021).
11:45 | Worker status: employees and independent contractors. California Assembly Bill No. 5 , § 296 (2019).
I. SETTING THE STAGE FOR PERFORMERS’ CLASSIFICATION
Matt Crossman, Host: We’re going to dig into performers and how to classify them in just a minute. But first, let’s lay the groundwork for why this is an issue. How to classify workers has been a huge issue in recent years because of the rise of the gig economy. Along with that has come government oversight. What is the Inflation Reduction Act and why does it matter for employee classification?
Anthony Panebianco: The Inflation Reduction Act came about in August of 2022, and it has some very particular language that provides additional support to the IRS—$45 million is going to be allocated to enforcement.
That enforcement has yet to be seen, but it’s going to be implemented. And one of the ways that it can be implemented is in the enforcement of how individuals are classified for tax purposes. It makes a difference for employers, it makes a difference for employees, and it makes a difference for the IRS, how they’re classified. So with this new viability of enforcement, employers really need to be on the lookout for what to do here.
MC: And that’s true across all types of work. You wrote a fascinating piece about how to classify entertainers that I wanted to dive into.
I want to read a quote from your piece: “While every venue wants to put on a good show, the exposure for venues to misclassify performers should create pause before scheduling such acts.”
My assumption before I read your piece was that the vast majority of actors, musicians, et cetera, would all be contract workers, and so this really wouldn’t be that big of a deal. Clearly that’s not the case. For venue owners, HR execs, and anyone else who might hire performers, what are some issues they need to think about when deciding how to classify them?
AP: I think you’re correct that most venues and most performers view themselves and the relationship that they have as independent contractors. But in truth, when you apply the law directly to the facts of the case, how the performers are hired, how they perform, what control they have, they don’t actually qualify in every instance as an independent contractor.
And that’s where employers and employees—the performers themselves—should be wary of simply going by what the standards have been for the industry. They should really be looking at how the law applies to them specifically.
If you have a band that’s touring around the country, and they come in for one evening, they tend to be independent contractors. But if you have a DJ that comes in every Friday night at the same time, they might qualify as an employee. They would tend to think of themselves as independent because they perform at other venues, they have other interests, they’re really independent in the music that they provide or what they control.
But they can become an employee, and that triggers different ways of allocating different benefits that the employer would have to provide. It makes a difference. For all of our clients, whether it’s performer side or employer side we ask them to look at the totality of the relationship with the individual or the groups to see how it truly is defined and should be defined.
MC: “Totality of the relationship”—I like that phrase because it goes exactly into how complicated this is. One of the complications of worker classification is the myriad tests. California has one test. New York has another test. The federal government has one, the IRS has one. For simplicity’s sake, let’s talk about the standard ABC test and take that one letter at a time.
I’ll read you A, and I want to hear what you think in terms of performers. A, “is the performer free from control in the performance of services?”
AP: Like all the other tests this has parameters to it: Do they have a set timeframe that they have to go on stage and perform by? Is it something like a theater stage where we know that they’re going to start at 8 o’clock, they have intermission at 9:15 and they’re done at 10?
Are they free in the manner in which they’re able to produce, provide, go about their business of making a performance? The quantity of control that a venue or an employer may have influences that first part of that test.
MC: All right, B, this seems like a big one to me, so I’m going to follow up with a question after I read it to you: “Is the service provided different than the service that the company provides?” If you’re hired to sing on, say, a cruise ship, that’s different than if you were hired for the exact same job at a concert hall. Am I interpreting that correctly? And how does that apply?
AP: You are interpreting that correctly. Although again, like with every limit of this test, there’s no hard line. It’s a gray area. You have to look at the totality of how each of these factors interplay with each other.
But think about it in terms of perhaps a bar where, yes, they have live music every night, but that’s not the business that they’re in. They’re in the business of selling alcohol or food, right? So they can say that entertainment is outside the normal scope of business.
But this has the most gray area, as you noted. If a cruise ship has live performances all day, maybe they are in the business of performance. They have different types of performers, but maybe they are in the business of providing performances, not just travel accommodations and going from port to port.
So it becomes a really big issue as to how they classify the performers themselves, but also what their nature of business is to make sure that it is copacetic with how the laws apply to them.
MC: Let’s wrap up the ABC. So C, the standard is “Is the performer customarily engaged in an independently established trade, occupation, or business of the same nature?” What does that mean?
AP: This one’s pretty clear in the sense that this has a more hard-line definition of it relative to the other limit tests. Is the act the performers are engaged in typical to what they’re doing for their career? Is it a special one-off or is it something that they perform as a career?
It doesn’t have to be the dominant part of their career. You could be an attorney by day and a lounge singer at night. But it’s still something that you’re doing as part of a business, part of your career and most fall into that category. But again, there’s always particular areas that are challenging.
We might have a group of attorneys that perform for one night just to do it as fun. We realize we all play guitar and we go and sign up for an open mic night. That’s not what they’re referring to under these laws. That’s not what they’re looking for.
It’s someone that’s traditionally engaged as some portion of their income, some portion of their jobs as an entertainer, as a performer.
II. THE PERILS OF MISCLASSIFICATION
MC: So we go through all these tests. We classify the person and we screw it up. What are the consequences of misclassification?
AP: Each state has their own particular penalties and fines. Most states have very harsh misclassification penalties. Those penalties can range from a few hundred dollars to a few thousand dollars for each misclassification.
It can range up to $100,000. Even though you only paid the performer perhaps a very small amount, the fines can far exceed whatever you actually pay the performers.
In Massachusetts, they want to protect employees and make sure that they get the benefits that they would be entitled to under the laws. They have a potential criminal aspect for willful misclassification of an employee. Massachusetts is the only state that truly has that kind of criminal aspect, but there can be very significant fines and penalties for employers that willingly or unknowingly misclassify workers. The dollar value of the fine changes based on whether it was done willingly or unknowingly. But we should all be aware that there are severe penalties for the misclassification
MC: One complication resulting from the rise in virtual and remote work, especially since the pandemic, is that an employer has to worry about the rules of states it doesn’t even operate in. If I have a business in New York and I want to hire someone from Texas, I have to be aware of what the Texas laws are.
Is that a factor here or does performing require presence essentially 100 percent of the time, so you’re working in a very specific space, and therefore, there’s really no confusion as to which states laws apply.
AP: More to the latter, where the performance actually takes place matters. Now we’ve had situations where you might have a huge concert and someone’s performing from another state, but they’re broadcasting them live for the performance. Those can get into a tricky situation as to where the performance is truly taking place? Is it taking place where it’s viewed or is it taking place where it occurred? It’s beneficial for employees and employers to understand where they’re located and what the rules and laws are where they are.
MC: As is typical in employment law, New York and California seem to be out front on this, and since many states follow their lead, they’re worth examining. Let’s take New York first. The State Department of Labor has issued guidelines for performing artists. What do those guidelines say that employment attorneys, HR execs, theater owners, and anyone else who might hire a performer needs to know?
AP: The Department of Labor in New York provides guidelines for what to look for, and it essentially follows the ABC test that we talked about, but it expands upon that to think of characteristics of those specific categories. And it’s helpful for each individual to again, look at the totality of their relationship to say, “how do I fit in under these suggested guidelines?”
They’re not black and white lines, they’re gray. And just to give an example that we’ve seen in New York time and time again, look at church services. If you have someone playing the organ every Sunday, are they an employee or are they an independent contractor? If the church controls the music that they’re playing, the church schedules the hymns, and the musician just plays along, they’re an employee rather than an independent contractor.
And New York goes into that in their guidelines to say, “look at your specific characteristics of the nature of how much control someone has over what you perform.”
MC: Let’s go to California next. California passed the gig worker bill, one of the most talked about pieces of legislation on this issue.
It was aimed to address the growing gig economy. Since its passage, there have been a lot of carve-outs, including in this issue. What’s happening there as far as entertainers go, that again, employment attorneys, HR execs, theater owners, and anyone else who might hire a performer needs to know?
AP: I think in California specifically when they were addressing the gig economy, they weren’t necessarily thinking of how it might apply to other potential employees or potential independent contractors outside of this very narrow economy, a sector. It’s huge in California. Because of the industry that’s in California, the music, the film, the theater, everything that goes along with it, there are such great trade unions out there that fought back to say, “You’re singling out someone that you didn’t intend to single out. As performers, we’re not intended for this particular gig economy. The musicians and the performers need to be outside of that guideline and that rule.”
And it took a while for that to happen, but it has finally been able to be made an exception to what would otherwise qualify them as employees rather than independent contractors.
MC: I want to read another quote to you from that piece: “Classifying all performers as employees is the most cautious approach to avoid legal ramifications. However, that has other legal and fiscal considerations that a venue must scrutinize.” What are those considerations?
AP: The other considerations are typically fiscal. Most performers want to be independent contractors. It is beneficial for them, it is beneficial for tax purposes. It’s beneficial in a number of different ways, particularly the control that they get to have over their performance.
If somebody shows up late to a performance as an independent contractor, they’re permitted to do so within the scope of their designation. As an independent contractor, they’re entitled to say how and when they can do certain things or how they’re going to perform and what they’re going to say.
If they’re an employee, the employer has more control over that. Now, for the employer, the considerations are almost universally fiscal and liability. If you have someone as an employee, there’s certain benefits you have to provide. There’s financial considerations you have to make, and there’s also a liability aspect to it.
Are you in control of what they do, therefore liable for whatever may happen? Or does someone take on their responsibility as an independent contractor for their own actions? An employer would be responsible for the actions of an employee under certain guidelines and under certain rules, depending on if they’re within the scope of their employment.
So there’s a lot of factors there. When I say it’s the most cautious, it’s the most cautious in terms of scrutiny from the IRS or scrutiny from the Department of Revenue and whatever state you’re in. And that’s usually the most cautious way to go about doing anything. But it’s not always the proper way to classify and you have to look at it on a case-by-case basis.
MC: There seems to be some interesting tension in this. The government has passed laws intended to protect workers. But those workers sometimes say, “I don’t really want that protection,” and that forces the employer to make a decision between someone who doesn’t want this classification, and the IRS who says, classify them this way.
If somebody calls you and lays out that tension, what do you say to them? Is it as simple as, you have to do what the law says, even if it means upsetting your employees?
AP: Yes. Employers always have to be more cautious, even if it’s against the wishes of their independent contractor, who says, "we really want to be an independent contractor here, we prefer it for a variety of reasons.”
You can still carve out to say within your contract with that employee to say, “we’re not going to control you. You’re going to be an employee. We’re going to give you the benefits that you would be entitled to as an employee because we think you need to be classified as same. But we’re going to have this exception where you can have full control and range of whatever you do. We’re not going to have the oversight that we would typically have as an employer-employee relationship, but you get the benefits that come along with it and the protections that come along with it.”
There are ways to negotiate that for those who really want to be an independent contractor, to give them the freedom and control that they want, but still have the protections that they deserve.
MC: I want to sit on that subject for a minute. I haven’t heard it explained quite that way. It’s almost like they’re creating a third type of employment where we’re going to classify you as a W2, but we’re going to treat you like a 1099. That seems like a pretty good solution.
AP: It’s a solution that you can create because you’ve already assumed the employer-employee relationship, so it’s not a misclassification. You have more freedom because we have this relationship, it all comes down to the benefits and the protection of the employee in these instances.
That’s what the courts and the legislation are looking for. For example, as an attorney, I might be able to work from home every day or work remotely, and that might be a choice, but that’s the freedom and control they can allow me as an employee. Whereas others might be in the office every day. There’s a distinction that allows freedom, but you still have the benefits that are generated and deservedly so as an employee.
MC: I want to read one other quote to you: “The U.S. Supreme Court has used the skill of the performers to assist in the considerations of independent contractor or employee status.” Can you expand on that?
AP: Sure. So they’re not looking at the skill per se, of one band versus another band, whether it’s Mozart versus the local guy at the local gin bar. That’s not what we’re talking about here. It is the average common citizen versus the performer. They’re not addressing whether or not they’re super-talented or anything, it’s just, do they have training?
Do they have any kind of proclivity towards that particular action and that performance? They’re provided a certain heightened scrutiny and a characteristic that they would be performers under the law.
MC: What challenges do creatives face because they’re creatives when it comes to things like worker classification and other legalities? Frankly, our brains don’t work that way. What issues do you need to address with them?
AP: The understanding of sometimes there are business decisions and sometimes there are emotional decisions, and really getting down to the blend of the two. And you have to be able to speak from the heart with your clients and listen to them truly as to what they want and what they are looking for, but then also have the very frank business decisions and be able to rationalize the decisions in a business sense.
And sometimes that takes a little bit longer with creatives, and it takes an open ear. In some instances, when you have giant corporate clients, they’re all looking at the bottom line and that’s all they’re looking for in decision making. But with some of these other organizations and clients that I work with, they do have a humanity component to it, and that’s impactful on society. It’s also helpful to understand where they’re coming from and what they’re looking for down the road, and that’s how we are best able to guide them.
III. HOW PERFORMING IS LIKE PRACTICING LAW AND VICE VERSA
MC: Now I want to pivot and ask you some professional development questions. I noticed on your resume that you’re on the board of trustees of the Cape Symphony. Two-part question. How did that happen? And how have you had to apply everything that we just talked about in that role?
AP: I am a classically trained pianist. I grew up playing piano and music my whole life, and I love the symphony. And they invited me to be on board, and I’ve been on the board for about four years, and now I’m the chair of the symphony.
And what we do relates to what we’re talking about now. We have guest performers, whether it’s a jazz trio coming out of New York to play for the weekend, or it’s guest conductors or guest musicians that we have all the time in each week’s performance.
We do the ABC tests ourselves—how much control and effort we put into it and how we classify them. We’re very cognizant of the laws and the rules that we have to apply on a weekly basis for our musicians, our performers.
MC: How did your work in becoming a classically trained pianist prepare you for your legal career?
AP: Oh, that’s a wonderful question. On a keyboard, you have 88 keys and you’re confined by those black and white keys of what you can and cannot do, and it seems very limited at first. And it’s the same way with the law.
There are laws meant to protect you, and there are guidelines and rules. But it’s the creativity of the performers, creativity of the lawyer, being able to work within that, to create a symphony, to make something beautiful, to work within that system, to be able to understand the scope of everything that’s possible and then be able to perform.
So it’s given me the ability to have form, but also be able to create beauty and think outside the box on these things.
MC: I imagine if you heard a performance from when you were, say, 10, and you listen to that now, you would go, wow, I’ve gotten a lot better. I want you to think about early in your career as a lawyer.In what ways have you gotten better?
AP: Experience and relying on other people and having cases and considerations that I wouldn’t have thought of. Every new experience is like every new note, every new chord that you haven’t thought of. It’s the same concept. You hear someone else play, you collaborate and have wonderful performers, wonderful colleagues.
It’s the same consideration that you say, this is how I grow. This is how I become better. We’re still all operating under the same confines, but we have just a bigger depth of knowledge and it makes us all better at our jobs.
MC: Let’s imagine a judge says, Anthony, I’m going to decide this case based on how well you perform whatever your favorite piece to play is. It’s like that old song about the devil coming down to Georgia, except instead of playing a violin, you’re going to play the piano. What song do you play?
AP: I would play an original, if it’s up to me. Never rest on somebody else’s laurels, rest on your own.
MC: I love that. Tell me some of the names of the pieces you’ve written.
AP: I’ve had a number of very awful bands and performances over the years. My most favorite song has a very deep meaning to me. It deals with the last time that I saw my grandmother. She was a classical pianist as well.
It is called Easter’s Day, and that’s probably my favorite piece. It has a lot of family meaning to me.
MC: So the last time you saw your grandmother was obviously Easter Day. How do you express emotion in music?
AP: Myself? Or how did we together?
AP: My grandmother was also a classically trained pianist. That’s where we got it from. And she was a performer more so than I ever was. She would always sit down at the piano with us and play along with us and tell stories. She was born in Italy and would tell stories about growing up. She told wonderful stories while she was playing chords and keys and running up and down the keyboard. It was wonderful. It was magical. And I do the same thing now.
MC: How has performing in front of people prepared you to argue in court?
AP: All eyes are on you. You have to be comfortable in your own skin, and you have to be confident in what you’re doing, and you also have to be able to be creative because when you’re performing, sometimes the crowd’s not into it. Sometimes the judge isn’t into what you’re saying. You have to be able to pivot pretty quickly. That’s taken a long time to learn. But it’s a great lesson to have.
This AccelPro audio transcript has been edited and organized for clarity. This interview was recorded on June 8, 2023.
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