In June 2014 an unemployment appeals hearing officer ruled that a talent agency which locates jobs for actors was an employer of those actors. That talent agency was a client of Stutheit & Gartland. The result of the hearing officer's ruling required the talent agency to pay unemployment taxes retroactively for three years for dozens of actors it had helped to find work. commission to the talent agency when they got work, and that the talent agency provided training how to audition successfully.
We appealed to the Industrial Claims Appeals Office (ICAO), and this week received a ruling which overturned the hearing officer's decision. The ICAO held that the actors gave no service to the talent agency, so the agency could not be their employer. The Colorado Division of Unemployment appealed to the Colorado Court of Appeals, where we and our client beat them again. Any employer facing an unemployment audit, or trying to set up work with independent contractors, would benefit from reading the decision of the Court of Appeals. Call us for a copy.
The Court of Appeals decision turned on the definition in the law of an "employment" relationship as one in which a
“service [has been] performed by an individual for another.” Colorado claimed that the actors and models were serving the talent agency by getting it commissions, and enhancing its reputation. The Court of Appeals said:
"We acknowledge that Marbles generally derives a benefit from
the artists’ efforts when they perform acting or modeling jobs for
Marbles’ clients. However, the existence of that benefit does not
mean that the artists were performing services “for the benefit of”
Marbles so as to constitute employment."
Other important facts were that the talent agency did not decide if an actor got a particular acting or modelling job. That was the choice of the client to which the talent was referred. The talent were free to turn down auditions. It was also important that the clients, not the talent agency, set work hours, performance standards, and otherwise controlled how an acting or modelling job was performed. The talent agency had no control over performance of the work.
This decision should protect sports agents, modelling agents and music agents. Beauty parlors, massage studios or others who allow contractors to use their facilities for a fee should be careful. The decision does not directly protect them them. It is important to have written contracts with your independent contractors. These contracts should check all the boxes the State of Colorado will consider in deciding if a worker is an employee. Colorado does not follow the I.R.S. test for what is an employment relationship. Your contractors should have their own business name, and should be paid under that name. Call us for contract language to deter the Division of Unemployment from trying to assess unemployment taxes.
