Last year several musicians contacted us because the CDLE [Colorado Department of Labor and Employment] was asking them as “Leaders of the Band” to pay in Unemployment Taxes for their band members. Now we all KNOW that musicians are always unemployed. So while the CDLE would be collecting some funds, we’re pretty sure they’d be paying out more than what they would collect.
But, THANKS to our good friend, supreme musician and teacher, Chris Daniels helped us with a way to decide if YOU need to be paying in unemployment taxes. Here’s what he had to say:
It is a complicated issue. The issues are not just the IC [“Independent Contractor] agreement… other things have to be in place too. They fall into two categories and that is “control of behavior” and “control of finances” — the IC agreement needs to have spelled out that there was not control of either and even then – if the claim reviewer or the auditor feel the preponderance of evidence does not support the Band Leader’s claim that the musicians are IC — they can deny the status and subject the Band to covering their contribution to unemployment insurance.
I don’t know anything about this case so it’s very hard for me to advise one way or another. The statute basically says EVERYBODY who does work for another person is AUTOMATICALLY classified as an employee. But if they follow the guidelines the CDLE allows for the exception – and allows them to function in a way that the “company” (the Band) hires independent contractors to play… so there are a number of problems that could trigger the decision not to allow them to do that.
I have pasted the statute that all this is based on below – hope that is of some help
The Colorado Statute | Section 8-70-117 C.R.S
(1) (a) “Employment”, ….shall be any, … service performed by an individual for another shall be deemed to be employment, irrespective of whether the common-law relationship of master and servant exists, unless and until it is shown to the satisfaction of the division that such individual is free from control and direction in the performance of the service, both under his contract for the performance of service and in fact; and such individual is customarily engaged in an independent trade, occupation, profession, or business related to the service performed. For purposes of this section, the degree of control exercised by the person for whom the service is performed over the performance of the service or over the individual performing the service, if exercised pursuant to the requirements of any state or federal statute or regulation, shall not be considered.
. . . . .
(c) To evidence that such individual is engaged in an independent trade, occupation, profession, or business and is free from control and direction in the performance of the service, the individual and the person for whom services are performed may either show by a preponderance of the evidence that the conditions set forth in paragraph (b) of this subsection (1) have been satisfied, or they may demonstrate in a written document, signed by both parties, that the person for whom services are performed does not:
(I) Require the individual to work exclusively for the person for whom services are performed; except that the individual may choose to work exclusively for the said person for a finite period of time specified in the document;
(II) Establish a quality standard for the individual; except that such person can provide plans and specifications regarding the work but cannot oversee the actual work or instruct the individual as to how the work will be performed;
(III) Pay a salary or hourly rate but rather a fixed or contract rate;
(IV) Terminate the work during the contract period unless the individual violates the terms of the contract or fails to produce a result that meets the specifications of the contract;
(V) Provide more than minimal training for the individual;
(VI) Provide tools or benefits to the individual; except that materials and equipment may be supplied;
(VII) Dictate the time of performance; except that a completion schedule and a range of mutually agreeable work hours may be established;
(VIII) Pay the individual personally but rather makes checks payable to the trade or business name of the individual; and
(IX) Combine his business operations in any way with the individual’s business, but instead maintains such operations as separate and distinct.
(d) A document may satisfy the requirements of paragraph (c) of this subsection (1) if such document demonstrates, by a preponderance of the evidence, the existence of such factors listed in subparagraphs (I) to (IX) of paragraph (c) of this subsection (1) as are appropriate to the parties’ situation.
(2) Where the parties use a written document pursuant to paragraph (c) of subsection (1) of this section, such document may be the contract for performance of service or a separate document. Such document shall create a rebuttable presumption of an independent contractor relationship between the parties, where such document contains a disclosure, in type which is larger than the other provisions in the document or in bold-faced or underlined type, that the independent contractor is not entitled to unemployment insurance benefits unless unemployment compensation coverage is provided by the independent contractor or some other entity, and that the independent contractor is obligated to pay federal and state income tax on any moneys paid pursuant to the contract relationship.
(3) Where the parties use a written document pursuant to paragraph (c) of subsection (1) of this section, and one of the parties is a professional whose license to practice a particular occupation under the laws of the state of Colorado requires such professional to exercise a supervisory function with regard to an entire project, such supervisory role shall not affect such professional’s status as part of the independent contractor relationship.
Chris Daniels
Assistant Professor C/T
University of Colorado Denver
720-837-4332
www.chrisdaniels.com
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