Making Teaching Artists Employees

Breaking News: California Law, effective Jan 1st, will re-classify millions of independent-contractors as employees

by Jean Johnstone, Executive Director, Teaching Artists Guild
How can we assure that our sector stays healthy across the board: that workers are rightfully protected and that non-profit, arts, and arts education organizations maintain the ability to offer quality programs to the most people?
Across the United States, Teaching Artists are typically employed as either independent contractors or as part-time (and occasionally full-time) employees. What are the differences between them, and what does the law say with regard to these arrangements? A law passed late Tuesday (September 10th, 2019) in California throws the conversation into stark relief. Here we take a look at the history of classification and what to do next, as this decision reverberates across sectors nationally.
Teaching Artistry is what we often call a hybrid profession. A teaching artist fuses the skills, practices, and sensibilities of an artist with the expertise of an educator; a foot in two fields is required of a successful teaching artist.^[1]
Under our current system, the nature of work available to teaching artists is usually part-time; often either project-based or temporary.^[2] For example, a teaching artist might be hired during the school year only, or for a summer camp, or for the duration of a specific grant. Thuswise, its professionals often operate as “gig workers”, participating in income-earning activities outside of traditional, long-term employer-employee relationships.^[3]
As any gig worker knows, without a long term, regular, or otherwise stable employment situation, a teaching artist pieces together work at a variety of organizations in order to make a sustainable living, often wearing different hats: teaching artist, artist, educator, arts administrator, and other related and unrelated work. In Teaching Artist Guild’s 2014 study, conducted by Next Step Consultancy, a majority of teaching artists who were surveyed reported working for 5 different organizations in the course of a week. 41% of teaching artists in the same survey reported that they perform their work as independent contractors, with only 14% classified as W-2 employees. However, their work arrangements varied: 45% are paid as both independent contractors and employees, depending on the project or work structure.
So what does it mean to be classified as either an employee and an independent contractor? And what legal and tax status is granted to each? Here’s what the IRS says:

Employee

“Under common-law rules, anyone who performs services for you is your employee if you can control what will be done and how it will be done. This is so even when you give the employee freedom of action. What matters is that you have the right to control the details of how the services are performed.”^[4]
In exchange, employees can expect:

To receive wage and hour law protections (like minimum wage, overtime, rest and meal breaks)
That their employer withholds payroll deductions and taxes, sharing the tax burden with the employee
A regular method and timing of payment (2x per month)
W-2 reporting
Legally mandated benefits (Worker’s Comp, Unemployment, State Disability, and paid sick leave)
To qualify for protections under the Fair Labor Standards Act, the Americans with Disabilities Act, and the Civil Rights Act
The ability to unionize

Independent Contractor

“The general rule is that an individual is an independent contractor if the payer has the right to control or direct only the result of the work and not what will be done and how it will be done. The earnings of a person who is working as an independent contractor are subject to Self-Employment Tax.”^[5]
An independent contractor can expect:

No paid sick leave, vacations, unemployment benefits, wage or hour protections, or other legally mandated protections or benefits.
To shoulder the entire payroll tax deduction; lowering your take-home pay by approximately 14% (and saving your employer this expense).
No ability to unionize

The long and short of it: Using workers as contractors positively benefits an employer’s bottom line, but they have no control over their workers’ schedules or technique, only the desired outcome. Working as a true, legal independent contractor affords a teaching artist flexibility and some amount of freedom, but incurs more expense and offers little worker protection.
In cases where being an independent contractor is warranted and legal, a teaching artist may decide that this is indeed the best fit for their lifestyle, and they may forge their career in business for themselves as such (ready parallels include the plumber or handyperson, hired by households or other businesses to fix a toilet or put in new flooring, in business independently and not for a larger organization). Alternately, arts education employers may desire the flexibility to try out a new program and gauge its success, or whether it can be further funded, before bringing on teaching artists as employees. In the past, much of this wiggle room might have been afforded to hiring organizations, but the landscape is quickly changing.

Recent Ruling ???????? Major Changes

While the IRS definitions seem relatively clear, they also leave some room for interpretation. However, a recent ruling in California, now codified into law via Assembly Bill 5, and on the Governor’s desk^[6], lays out a crystal clear set of new guidelines to determine a worker’s status, and the effects are already being felt across the country. Since 1989, the main test in California for whether a worker was classified as an independent contractor, was comprised of 9 different factors, set out in the Borello case^[7]. Because the Borello test required balancing so many different factors, and did not include strict instructions for how those factors should be weighed, there was more room for interpretation by employers, or those wishing to be employed in a certain way, to argue their case.^[8] The new ruling (referred to as Dynamex, or the ABC test) makes this nearly impossible, and has had some California organizations lobbying in Sacramento to create an exception for their particular kind of business.
According to the Dynamex ruling, now law in CA, employers must establish all three of the following in order to treat someone as an independent contractor:
(A) the worker is free from the control and direction of the hirer in connection with the performance of the work, both under the contract for the performance of such work and in fact;
(For a teaching artists, this means that an employer may not give you a specific schedule, such as where to show up at what time; nor can they dictate your curriculum or other aspects of your teaching)
(B) that the worker performs work that is outside the usual course of the hiring entity’s business; and (This means that the organization that hires you must not be in the same business as you, ie, not in the business of providing arts education)
(C) that the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed for the hiring entity. (This means that if you are hired as a teaching artist with independent contractor status, this must be the kind of work that you regularly do; this must be what you are in the business of providing, typically)
Part B of this test has major implications for hiring organizations in the arts education business in particular because typically those organizations are in the business of offering — what else? — arts education, making their teaching artist workers inarguably employees. Yet many arts education hiring organizations do not classify their teaching artists as employees, and doing so will require a significant shift.
How significant? Re-classifying contractors as employees will incur a roughly 30% increase in payroll expenses.^[9] For a non-profit organization working in the arts and/or education fields, this increase in expenditure will mean major reallocations of resources in often already scant budgets.

Who does this decision affect?

Even if you aren’t in California, this decision probably affects you in some way. Here’s the low-down from Forbes Magazine:
“Although the ABC Test isn’t law in every state, it is being used in some capacity in nearly every state. Massachusetts and New Jersey already use the ABC Test to restrict the number of workers classified as independent contractors. Other states use the ABC Test for specific situations, such as determining unemployment compensation. Because current independent contractor vs. employee laws are ambiguous and lead to misclassification (one source estimates that 10-20% of employers misclassify at least one employee), the adoption of the ABC Test is on the rise in other states.”^[10]
Democratic presidential-nominee contenders are weighing in as well, with Kamala Harris, Pete Buttigieg, Bernie Sanders, and Elizabeth Warren making statements in favor of the codification of the ruling into law as a protection of workers.^[11]

What about the arts sector?

Gaining the protections and benefits of the employee status for workers formerly classified as contractors may signal a new era for worker rights, but there are concerns from employers about the effects this will have on them, some of which are particular to the arts education community. TAG recognizes that small arts organizations may have a valid fear that this increase in payroll expenses and related costs will push them out of existence; larger organizations with more established programs may handle the expense by providing fewer services, which in the short term will affect teaching artists and students. In a field already challenged to provide necessary services in deviance to their true cost, what will the effects of this law be?
It should be noted that this bill (AB5), which may affect some 2 million workers in CA^[12], was not written with arts organizations, or arts education, in mind. It sought to curb the purposeful mis-classification by major corporations, including tech firms, based on the contention of the California Labor Federation and others, that the gig economy perpetuated by Uber, Lyft, Doordash, and others, has opened the door to mass exploitation of low-wage workers, a trend that is worsening income inequality.

As We Move Forward

The Dynamex ruling is clear; the law passed in the CA Senate on Tuesday, September 10th 2019, is even clearer. Lobbying for an exception for our field will not, in the long run, serve our interests as a whole. It does not lift the value of the arts in American perception, nor fix a system that requires a reliance on under-payment and philanthropy to eke out its existence. It does not entice young people and artists of color to choose a career in the arts and arts education as they view it (rightfully) as unsustainable; it loses us our brightest stars in the profession, who find they must switch careers in order to raise a family. The conversation must now become, not how to work around these vital worker protections in order to stay afloat in a system which does not fully value our services, but how can we assure that our sector stays healthy across the board: that workers are rightfully protected and that non-profit, arts, and arts education organizations maintain the ability to offer quality programs to the most people?

How can we mitigate the effects of the new law on arts organizations by helping teaching artist hiring organizations advocate to funders for increased support?
How can we use this moment to elevate awareness of the importance of our services and their true cost?
How can we honor the whole field by standing up for the rights of arts workers, while supporting the arts organizations who hire them?

[1] https://www.berklee.edu/careers/roles/teaching-artist
[2] http://teachingartistsguild.org/wp-content/uploads/2014/07/Teaching-Artist-Shared-Benefits-Project-Final__Sept-30-20141.pdf
[3] https://www.gigeconomydata.org/basics/what-gig-worker
[4] https://www.irs.gov/businesses/small-businesses-self-employed/employee-common-law-employee
[5] https://www.irs.gov/businesses/small-businesses-self-employed/independent-contractor-defined
[6] https://legiscan.com/CA/bill/AB5/2019
[7] https://caselaw.findlaw.com/ca-supreme-court/1774638.html
[8] http://www.lgclawoffice.com/new-test-for-employee-vs-independent-contractors-in-california/
[9] https://www.nolo.com/legal-encyclopedia/pros-cons-hiring-independent-contractors-30053.html
[10] https://www.forbes.com/sites/mikekappel/2018/08/08/the-end-of-an-era-how-the-abc-test-could-affect-your-use-of-independent-contractors/#7df566c01f66
[11] https://www.usatoday.com/story/news/politics/2019/09/06/what-you-need-know-california-ab-5-gig-economy-bill-uber-lyft-drivers/2213459001/

California Debates Law Requiring 2 Million Independent Contractors to Become Employees