Portland, indie music capitol of the USA; pay your unemployment taxes even though you didn't employ musicians.
Ok readers (especially in the rest of the world,) I usually try not to get too granular about the Portland music scene unless I'm excited about a band or 2.
Here's an exception – a 1960 OR state law is apparently being invoked in a manner that it wasn't originally written for; it holds that a venue is considered an employee when anyone performs in said venue and that unemployment taxes are therefore due…
Local lawyer Anne Koch has written an email to people who may be able to help….even the Moose. Read on.
Dear MFNW board, NWLA board, attorneys and other interested parties: I apologize for the long email. The Oregon Employment Department (OED), in the course of a random audit of Mississippi Studios, has declared that every musician that has ever performed in this venue is legally considered an employee of the venue.
As a result, Mississippi Studios will now owe unemployment taxes and penalties on all musicians they've ever paid.
OED's determination has been made based on a law that's been in existence since 1960 but has mostly not been enforced. ORS 657.506 provides that "the person or organization engaging the services of a musician shall be considered the employerÃƒÂ¢Ã¢â€šÂ¬¦except when the services are performed pursuant to a written contract that expressly designates one or more musicians who sign the contract as responsible for the filing of any reports and the payment of any taxesÃƒÂ¢Ã¢â€šÂ¬¦The musician who signs a written contract designating them as responsible shallÃƒÂ¢Ã¢â€šÂ¬¦be considered the employer of any musician performing services under the contract who did not sign the contract."
BTW there is an exception to this general rule for "non-profit employing units" but it was literally held in a 2006 case that this does not include 501(c)(3) organizations (?). See Oregon Festival of American Music v. Employment Dept., 204 Or.App. 478 (2006).
So, unless there's a contract in place, the musician is an employee of the venue.
But, under the existing case law that analyzes this statute, the contracts need to specify that the musician is responsible for payment of any and all state and federal taxes, whether income, unemployment, etc. Additionally, any person signing on behalf of the band must agree and represent that he/she is signing on behalf of the band, that he/she covenants & agrees to be responsible for the payment of any and all taxes due, and that he/she indemnifies the venue for any failure to pay same.
I imagine for those of you who do use contracts in this type of scenario that your agreements may not have all the requisite language. From some initial research of the legislative history behind this law, it appears it was initially proposed by restaurants that had weekly or nightly entertainers who performed there on a regular basis. The original intent of the law was to avoid having restaurants get stuck owing unemployment taxes without a clear contract declaring the employee status of the musician.
The 1983 amendments to the law were intended to clarify the language and do away with a seeming difference in the way the law treated solo acts, duos, and groups/bands. But, the OED reads the law as if it were meant to place an irrebutable presumption of employee status on all musicians, regardless of the fact that most of them are clearly independent contractors. In any event, this law was never meant to apply to venues such as Mississippi Studios and the like.
There are obviously a lot of problems with the statute as written. It is unreasonable to expect that a written contract will be signed for every performance that takes place in this state. It is also unreasonable to find that if there is a contract, that the person signing on behalf of the band is considered the employer of the rest of the band.
And, as important, complying with this law would be overly burdensome on a number of levels for venues. From a legal perspective, it is ridiculous to imagine that without a sufficient contract, that state and federal employment laws (regarding pay, leave, unemployment, etc.) apply to the musicians playing at the venues around town. This is just not practical. The law clearly needs to be changed.
I am emailing to make you aware that this is going on (and that this law even exists), and to invite you to spread the word, get involved, or otherwise help in any way you feel inclined.
What you can do: Write a letter to the OED or the Attorney General to express your concerns about the enforcement of this law. You can speak generally about how this affects the industry, without giving any specifics about your own business practices, if you're reluctant to direct any attention to your own business. But, I also urge you to speak with your own attorneys if you have individual concerns about the application of this statute and/or what to do.
Oregon Employment Department — Tax Section Attn:
875 Union Street NE,
Salem, OR 97311-0030
Oregon Department of Justice
1162 Court St. NE
Salem, OR 97301
The bigger picture: Jim and I and some others are forming a task force to address how to change this law.
If you'd like to take part, email Jim Brunberg at jim at mississippistudios dot com.
We are in contact with the Governor's office, will contact the Attorney General, and are further researching the process for amending the statute.
I believe Jim is in contact with The Oregonian and The Tribune about this, and I believe some of you folks at the Willamette Week. Full press coverage would be helpful as well.
Thank you for your time,
Anne Anne E. Koch
Motschenbacher & Blattner LLP
117 SW Taylor Street, Suite 200 Portland, OR
akoch at portlaw dot com