How many times have musicians heard this from an employer: “We can’t afford to pay you more..we’re a nonprofit!” A recent negotiation that musicians and I went through together helped me sharpen my thinking on the best way to counter this myth.

Most of the employers that Local 802 negotiates with are, in fact, nonprofit entities. This fact poses many challenges to negotiations that only a few other unions have to confront.

Certainly, some unions (especially in NYC) also bargain against nonprofit companies that employ workers like janitors, home care attendants, direct care workers and Head Start teachers, to name a few. These workers are represented by unions like AFSCME, DC37, 32BJ and SEIU. Workers in these trades rightly deserve the benefits of unionization but typically cannot command high wages. They are often seen as replaceable by their employers, even if they work very hard or are highly experienced or possess invaluable institutional knowledge. Unfortunately, their bargaining capital is inhibited by the fact that their jobs are unfairly seen as “low skill” and fungible.

On the other side of the continuum, Local 802 represents highly trained professional artists who are extremely skilled and whose work is well known and valued by society at large. We are essentially what could be called a “craft” union, rather than a “trade” or “industrial” union. For this reason, we have a higher degree of bargaining power.

Unfortunately, we often hear from the other side of the table that our bargaining demands cannot be satisfied because the employer is a “nonprofit” and as such claims it cannot afford the terms that musicians seek. This recently occurred in negotiations I was involved in with a major nonprofit theatrical producer whose productions are Tony eligible.

The production they were involved in was billed as a “Great Big Broadway Show.” It featured world-renowned Broadway stars and was co-produced by Cameron Mackintosh, arguably one of most successful, influential and powerful theatrical producers in the world (so says his Web site).

The musicians employed for the production were required to play extremely challenging music with very few breaks. They also were on stage in view of the audience.

Nonetheless, this employer stated that the demand that Local 802 was proposing — that these musicians be compensated at the rates in the Broadway League agreement — were not achievable. The employer said, “We can’t afford Broadway rates because we’re a nonprofit.”

A committee member responded in turn, “Getting Broadway musicians to perform at the rates you propose to pay is like buying a discount Ferrari.”

Ultimately, I’m happy to report that musicians won higher rates that are much closer to those paid to musicians performing at League theatres. We also managed to win a true doubling premium, a step up from the previous language (which said that doubling was “included” in the wage rate). On the whole, the negotiations produced a successful progressive result. But it still wasn’t Broadway.

The course of this negotiation prompted me to think a little deeper about the employer’s claims that “We’re a nonprofit: we can’t afford to pay our musicians more.” The truth is that nonprofits are, in fact, permitted to earn profits, even substantial profits, just like a for-profit employer is! The only difference is how nonprofits actually utilize those profits.

By law, a nonprofit organization must have a purpose or social cause beyond profit generation that justifies its designation by the IRS as tax exempt under Section 501 of the Internal Revenue Code. The tax exemption is meant to provide an incentive for companies to engage in socially beneficial actions that exceed the goal of earning a profit. Nonetheless, “earning a profit” and “engaging in a socially beneficial activity” are not mutually exclusive actions.

The ultimate distinction between a for-profit company and a nonprofit company is that nonprofits are legally required to distribute any profit they earn to further the advancement of the organization’s goals. If a nonprofit realizes surplus income at the end of the year, that income must be reinvested into the organization. This is the very reason why their tax returns (IRS Form 990) must be publicly disclosed . This ensures that their public mission is being adhered to. (See this source for more.)

Some for-profit music producers or venues we negotiate with have converted their organizational structure to a nonprofit one. The Broadway-adjacent nightclub 54 Below is one recent example.

There are palpable benefits when an employer converts to a nonprofit. One benefit is, of course, tax exempt status. Another is the ability to secure certain kinds of grants and donations from public and governmental entities.

However, the fact that 54 Below is now a nonprofit by no means inhibits its ability to earn a profit. We are still negotiating with 54 Below and fighting for competitive compensation for the musicians who perform there.

Here’s the point: paying musicians at competitive rates is entirely justified as a “reinvestment” in the mission of a nonprofit company whose purpose is to provide live music and theatre. This is completely in line with IRS regulations guiding the operation of nonprofit companies.

So the next time we hear, “We’re a nonprofit: we can’t afford to pay our musicians more,” our response will be the same as always: “You better find a way to pay musicians fairly. Your mission as a nonprofit demands it!”

If you’re not being paid the wages and benefits you deserve, contact Local 802 at www.local802afm.org/hotline.