STIMULATING ORGANIZATIONAL SUCCESS (S.O.S.) ::
Artists: Employee or Contractor?
The Washington State Arts Alliance and Washington Volunteer Lawyers for the Arts held a seminar on the appropriate use of independent contractors. The following notes are from the seminar. This information is intended for general information only. You should seek professional advice related to your specific situation, including any legal advice that may apply. The City of Seattle makes no representation that the information is complete, accurate or current.
Employment Security, workers' compensation and the minimum wage laws were set in order to protect the rights of workers. The current dilemma seems to be that while most arts organizations want to pay artists, they can't afford to pay artists as employees. So what can arts organizations do to pay an artist what they can afford, while meeting legal obligations? Here are some suggestions and information that might help.
Department of Labor & Industries (L & I):
How does an audit get triggered?
Independent Contractor? Employee? Volunteer?
Designers and other artists may possibly qualify as independent contractors as long as they are allowed to set their own hours and are not supervised but are simply given a deadline for the completion of their work. Independent contractors are in business for themselves and therefore should be taking care of their own taxes. The employer should make sure independent contractors are licensed and have their own UBI # (get copies as proof).
Is there a way to pay artists an honorarium and still be legal?
However, the company may offer to cover certain artist expenses rather than giving the artist an honorarium. There are limits to this option, but it should work for most of the smaller companies in Seattle.
To calculate the maximum amount artists can receive for travel reimbursement, the following formula can be used for each artist:
[Roundtrip distance from artist's home address to the arts organization (or wherever work is taking place)]
You may give the artist an amount that is less than the maximum amount calculated, but the company cannot give the artist more than that maximum.
If the company is audited, they will need to keep records of how the travel reimbursement amounts were derived.
A company may also reimburse artists for any unusual items they had to purchase in order to do their work for the company. But the company must be able to demonstrate that the artist cannot get any continued benefit from what was purchased. For instance, it might be easier to make a case for reimbursing an artist for buying hair whitener or fangs to play a certain role. But if the artist bought new shoes for a role, but could continue to use those shoes after the production is over, reimbursement for the shoes might not be allowable. The company should keep a copy of any receipts for verification.
The company will need to be clear with the artists that they are volunteers and that the stipend they are receiving is a travel or expense reimbursement and not an honorarium.
Since it is still possible for volunteers to get hurt on the job, to be on the safe side you can classify workers as volunteers and go ahead and pay for their L & I coverage so that they are protected in case of injury. By doing this, you wouldn't be obligated to meet the State's minimum wage laws, since they are still considered volunteers.
What about giving artists gift certificates or gift cards instead of pay? Would that be allowable without having to pay L&I; coverage?
What about interns?
For more information: Dept. of Labor & Industries, (360) 902-4817
Basically, the same rules apply for determining if someone is an employee or independent contractor. If someone is performing a service for pay, then they are considered an employee. Exceptions:
How does an audit get triggered?
When do I have to pay employment security?
So, the primary choice an arts organization has is, if they compensate someone, they should cover that person's employment security, or else, they need to treat that person as a volunteer.
For more information: Employment Security, (206) 706-3801
Washington Minimum Wage:
* A company does not need to be a federally recognized 501(c) 3 non-profit. Since L&I; is a state agency, incorporation as a non-profit corporation in the state of Washington is enough to meet L&I;'s non-profit status requirement.
** As a federal agency, Employment Security does require that an organization be an IRS federally recognized non-profit in order to qualify for this exemption.
Seattle Youth Symphony.
Photo: Colleen Boyce.