Not long ago at a meeting of our Jazz Advisory Committee, a member described what unfortunately is a common situation.
He had been working for a well-known artist and that work accounted for a large part of his yearly income.
He was being paid well — but on a 1099. Most of his other work was also as an independent contractor.
At tax time he was being hit with staggering federal, state and FICA tax bills.
Not long after that, we learned that employers at one of the major broadcast networks had recently been treating some of their musicians the same way. They were paying musicians on 1099’s in order to avoid workers’ comp, unemployment, disability, and their share of musicians’ Social Security and Medicare.
And in the past year we’ve found out that more and more hospitals and nursing homes are hiring musicians and paying them on 1099’s.
The list goes on and includes other major employers.
This practice hurts our members and in the end undermines everything that workers and unions have been fighting to achieve for the last 100 years. And — it’s illegal!
How much are musicians losing when they’re paid as independent contractors?
First is FICA, short for the Federal Insurance Contribution Act. It’s composed of two parts, Social Security and Medicare. Social Security is 12.4 percent of wages — up to a cap of $96,500 in earnings (in 2007). Medicare is 2.9 percent of wages with no cap.
This total of 15.3 percent is supposed to be split evenly between employees and employers.
But when musicians are paid as independent contractors, musicians have to pay both their own share and the employer’s 7.65 percent share.
This 15.3 percent total — on top of state and federal taxes — can easily reach 50 percent of your total income.
For a certain amount of 1099 income, a musician can come up with enough work-related deductions to ease the tax burden.
However, if a majority of your annual income is on 1099’s and you haven’t saved enough, you could face a very difficult tax season.
Another thing musicians lose when they are paid on 1099’s is the possibility of unemployment pay and the protection of disability and workers’ compensation payments.
In addition, the New York State unemployment and disability insurance programs lose millions of dollars in revenue each year because of employer avoidance of these payments.
In the 1980’s, Local 802 was successful in changing New York state law to specifically classify musicians as employees.
The law is one thing. Enforcement of the law is entirely another matter.
Former Governor Pataki was less than cooperative in stopping the misclassification of workers.
Neither the Department of Labor, nor its unemployment and worker compensation insurance divisions — which together are responsible for enforcement — would respond to our appeals that the laws be enforced.
In some cases, they were actually telling employers how to get around the law!
The only way to bust an employer was for a musician to file for unemployment — or get hurt on the job and file for workers’ comp. Either action could result in a D.O.L. investigation but would also likely mean the end of the musician’s relationship with that employer.
SIGNS OF HOPE
A new administration arrived in Albany this past January with the election of Eliot Spitzer.
Local 802 met with representatives of the new governor’s Department of Labor. We asked for their cooperation on this issue and were pleased with their response.
In October, Gov. Spitzer signed an executive order directing the appropriate state agencies — including the D.O.L. — to begin a crackdown on the problem of employee misclassification.
Both the New York state AFL-CIO and the New York City Central Labor Council have joined the effort to make workers aware of how much they lose when forced into independent contractor status and what they can do about it.
The Department of Labor has set up a 24-hour unemployment insurance fraud hotline. Musicians — or any workers — who think they have been misclassified can make an anonymous and confidential report by calling (866) 425-1499. The call is toll free.
DOING OUR PART
Local 802 has always understood that there may be parts of our business that don’t fit easily into the employer-employee model, usually because of the very limited resources involved or some other unique set of circumstances.
However, for most of their work, musicians are and should be classified as employees — not independent contractors. Employers should be paying statutory benefits and should be paying their share of FICA.
Local 802 intends to cooperate in every way it can with the state’s long-awaited crackdown on employers who are cheating our members.