Actors/Crew: "Employees" or "Independent Contractors" ? (short film)

Randall_Oelerich

Randall_Oelerich

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Actors/Crew: "Employees" or "Independent Contractors" ? (short film)

Are actors and crew 'employees' (e), or 'independent contractors' (ic), for purposes of just making a short film where they would be hired for just a day or two? Huge difference in the hassle factor between the two. I want to be legal. The IRS is somewhat vague on defining the difference, and yet holds one accountable if the wrong distinction is made, with stiff fine$. For a feature film, no problemo, I would hire an accountant and payroll service, consider actors and crew as employees. But for a short film? For a short film there would seem to me to be much less of an employee status, not a regular paycheck, not so much direction. Is there any way to consider actors and crew as IC for a short film? What if the sound person is hired as a 'Sound Director' and give great lattitude? I believe another thing would be to have both crew and actors provide a written estimate bid for the 'job' for so many days, provide their own food (so as not be fed as employees might be), etc? Any thoughts, tips? I just want to make a few short films this year, but do it legal, but simple. If I need to deal with 'employees', payroll, withhold social security, pay unemployment tax, geesh, the hassel hardly makes it worth doing.
randall
 
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Randall_Oelerich said:
Are actors and crew 'employees' (e), or 'independent contractors' (ic), for purposes of just making a short film where they would be hired for just a day or two?
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You need to check your state's laws on what is category is classed as an employee, and what can be classed 'independent contractor'.

I'm pretty sure in California, 'actors' would be employees. I'm not sure about the other categories, unless there's a 'union' involved. If there is, then I'm almost certain the person providing services would be an employee.

I believe there is the concept of 'volunteer', and as such, a volunteer is not an employee. The criteria to determine that rests on such questions as 'obligation to perform a specific duty'... a volunteer can not show up... show up and leave, or show up, do nothing, and be asked to leave... etc. A volunteer may be reimburse for expenses, say travel, food, miscellaneous, up to their 'out of pocket' expenses, or perhaps a 'reasonable' stipend, if you don't want to collect specific receipts.
 
They are independent contractors. The distinction is that an employee is someone you hire for a an extended / indefinite length of time. An independent contractor has a finite contract for a certain job or duration.
 
djkarn105 said:
They are independent contractors. The distinction is that an employee is someone you hire for a an extended / indefinite length of time. An independent contractor has a finite contract for a certain job or duration.
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From the California definition of "Independent Contractor":

3353. "Independent contractor" means any person who renders service
for a specified recompense for a specified result, under the control
of his principal as to the result of his work only and not as to the
means by which such result is accomplished.
----------------------

The operative wording is 'result of his work only and not as to the means by which such result is accomplished". To me this suggests that 'actors' are not 'independent contractors', as the director is specifying the 'means' by which the acting result is to be accomplished. Things get a bit more cloudy on such things as 'sound', 'lighting', 'director of photography', if they supply their own equipment and never listen to specific commands of the director...

This definition has nothing to do with 'duration' of the employment relationship. A 'day laborer' under the direction of a director is an employee. SAG and any other union can only represent 'employees'. A director could 'contract a 'service', such as 'build a set', or the like, being given a set of plans, etc. and the builder either does the work himself as a 'contractor', or hires assistants, but those workers are not employees of the film production.

As with all these things, I'm not a lawyer... so, it does behoove one to find out these sorts of details, as the time when this sort of thing becomes a problem is when someone is injured, or property damaged on a set, however people have 'thought' of themselves... independent contractors, employees, all comes to disaster...

In my own entrepreneurial experience, even having someone 'claim' that they are an independent contractor, be paid accordingly (as no State Disability Insurance, Tax withholding, etc.), given 1099 forms etc. is meaningless when the labor board gets involved, as was the case with an accountant my partner hired, then told there was no more work, and she applied for unemployment benefits... and won...
 
j1clark@ucsd.edu said:
In my own entrepreneurial experience, even having someone 'claim' that they are an independent contractor, be paid accordingly (as no State Disability Insurance, Tax withholding, etc.), given 1099 forms etc. is meaningless when the labor board gets involved, as was the case with an accountant my partner hired, then told there was no more work, and she applied for unemployment benefits... and won...
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Exactly, in a seminar I attended regarding legal issues in film and video production, I was told that the primary way they make this distinction is if the person was hired for the duration of a project / a specific amount of time. Granted my question was in the context of a production company that hires talent (which includes the director) and crew on a project by project basis. Another factor is whether or not the person is working on equipment you own or not. Basically, if I pay you to edit my commercial, give you the footage, you take it home, edit it on your system and bring it back to me you are a contractor. If I pay you to be my editor, come into my office every day and edit what I tell you to on my system you are an employee.

RE: Actors vs crew I would say there is probably good info on the SAG website and if your budget is substantial enough I recommend getting a payroll service experienced in this to CYA.

Ultimately though you should talk to a lawyer if you are really concerned.
 
I think it depends on the laws of where you live. In Canada and certainly in the province of Ontario actors and crew are 'independent contractors' not employees. It's like hiring someone to watch your kids or someone to fix your plumbing. They work for you but are not employees per se. You pay them to perform a job for a limited and specified period of time and that is all.
 
Well hell, Ontario is just a 3 hr drive from where I live in Duluth MN, worst case I drive/fly up the north shore of Lake Superior and make my shorts there!

Belief Pictures said:
I think it depends on the laws of where you live. In Canada and certainly in the province of Ontario actors and crew are 'independent contractors' not employees. It's like hiring someone to watch your kids or someone to fix your plumbing. They work for you but are not employees per se. You pay them to perform a job for a limited and specified period of time and that is all.
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After several emails to my state (Minnesota) department of employment, I got what I consider to be useful information on this, such that I feel at ease now paying wannabe actors and a crew person to help me make an artistic short film or two, without dealing with employee/contractor definitions, tax witholding, etc. There are some exclusions to the laws for withholding taxes, paying federal employee unemployment uninsurance, all that sort of thing. The key exclusion as I read it (at link above) is this one: "persons engaged in casual labor not in the course of the employer's business." My 'business' is not filmmaking, not making short films. Enough said. Now I feel okay now paying wannabe actors and a crew person to help make make an artistic short film or two or three, on the side, while I continue my regular 'business' of my day job. When I make a feature indie, of course I will be in the business of filmmaking, will form an LLC, will hire a payroll company, treat actors and crew as employees, get a lawyer, all that fun sort of business stuff.

 
Randall_Oelerich said:
After several emails to my state (Minnesota) department of employment, I got what I consider to be useful information on this, such that I feel at ease now paying wannabe actors and a crew person to help me make an artistic short film or two, without dealing with employee/contractor definitions, tax witholding, etc.
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I think for small projects, where there is little or no chance of 'danger', or the like, I think one could pretty much 'do what one pleased' within reason, and if any regulations were bent, no one would worry.

I wouldn't 'advise' someone to do that... but if they figure it out for themselves... It's not my worry...

The state tax coffers are not going to be empty on account of small productions not paying the taxes that may have been regulationwise required...

I might hand out 1099 forms, because I may be wanting certain 'tax benefits' myself... if I did pay something for services, other than travel and perhaps some per diem expenses. In that case I don't think
a 1099 is required anyway... how do I know the actor didn't spend $1000 on the hotel, but shacked up with a friend for nothing...
 
I'm no tax professional, but this seems pretty cut and dry to me.

http://www.irs.gov/businesses/small/article/0,,id=99921,00.html

I went to the link about behavior and some big ones I'm seeing are...

"When and where to do the work."

Working as any crew member on the production, I receive a call sheet that tells me exactly when and where to show up. I have no choice in this matter.

"Where to purchase supplies and services."

I can whine all I want about what rental house I want to use, but if production has one already that they're going with...that's pretty much that. No getting around it.

"What order or sequence to follow when performing the work."

Again, at the beginning of the day I receive a call sheet which has a sequence of scenes that we are to shoot that day. No choice once again.




Now looking into the Financial aspects of what seperates an indepedent contractor from an employee.

"An independent contractor often has a significant investment in the equipment he or she uses in working for someone else."

I have no real significant investment in anything. Sure, I may carry a few hundred dollars worth of tools on my belt, but if they were to go missing, the job can still go on. This goes for pretty much all crew memebers. This is of course with the exception of the few who own their own grip truck, or have their kit rentals that they get on the show. Most don't fall under that category.

"Independent contractors are more likely to have unreimbursed expenses than are employees."

I never have any unreimbursed expenses as a crew member.

"Having the possibility of incurring a loss indicates that the worker is an independent contractor."

There's never a chance that I can lose money by showing up for work.

"An employee is generally guaranteed a regular wage amount for an hourly, weekly, or other period of time....An independent contractor is usually paid by a flat fee for the job."

While it is apparently common in some professions to pay independent contractors hourly, I don't get paid flat rates. I get a day rate based on 10 or 12 and if we go over, I get paid 1.5x based on an hourly rate.




Now finally moving onto the type of relationship..

"If a worker provides services that are a key aspect of the business, it is more likely that the business will have the right to direct and control his or her activities."

Most production companies are in the business of making movies/music videos/what have you, and I would definitely say that crew members are performing a service that is a key aspect of the business.





As you can tell, I get bummed out when people hand me that 1099 form and later in the year find out how much money I owe the IRS. But oh well...
 
j1clark@ucsd.edu said:
You need to check your state's laws on what is category is classed as an employee, and what can be classed 'independent contractor'....
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So I looked that up this morning, MN state laws/definitions. I have never seen such an issue to be so indeterminate and gray zone as it pertains to actors to be involved in a short film or a no-budget indie feature film. Why do states leave this as such a gray zone, why don't they make this clearer for indie filmmakers? I just emailed my state's dept of employment on this to see if i can get something definitive in writing. But here is a copy/paste of the relevant section from a document on this provided by the state of MN dept of employment. In favor of 'ind contractor', I would be working around the schedules of my actors, weekends, etc so they keep their normal day jobs; there is no 'training' of actors as they already know their craft; there is no integration-- the actor acts then the business proceeds without them as the film is edited, sold, etc.; there are no 'set hours of work' in the sense that i would be working around the schedules of the actors, not like they have to show up 9-5 M-F; their is no 'Full time required'-- actors would be involved for 2-10 days total depending on their role; actors do not work on 'employer's premises', rather they work on various scene locations; there is no 'continuing relationship'; no 'oral or written reports'; no payment by day/week/month-- payment would be by the gig, and if the gig is not complete by the actor then that actor incurs a liability (favoring indep contractor status) by not receiving their gig pay; actors work for more than one company at at time, either for their day job M-F job or for other indie films, favoring indep contract.


THE EMPLOYMENT RELATIONSHIP
This book is designed to be an employment law resource for Minnesota business owners. Before delving into the law surrounding the employment relationship, however, the business owner must determine whether the individuals it has retained to perform services are employees or independent contractors. Business owners who use independent contractors may think they do not have employees and, therefore, that employment laws do not apply to them. An individual’s status as an independent contractor, however, is not determined by agreement or by what he or she is called; the individual’s status is determined by what he or she does. If an individual performing services for a business is being treated as an independent contractor, but is performing the work of an employee, and an agency such as the Internal Revenue Service or the Minnesota Department of Revenue discovers this error, the results can be expensive to the business.
From the state of MN employment documents:

Before designating an individual as an employee or an independent contractor, the business owner should consider the following factors:

•Instructions. A worker who is required to comply with another person’s instructions about when, where, and how he or she is to work is ordinarily an employee.
•Training. Training a worker by, e.g., requiring an experienced employee to work with him or her, corresponding with the worker, or requiring the worker to attend meetings, weighs in favor of employee status because the employer for whom the services are performed wants the services performed in a particular method or manner.
•Integration. A worker is subject to direction and control if his or her services are integrated into the company’s business operations. Thus, this factor weighs in favor of an employment relationship.
•Services rendered personally. If the worker must perform the agreed upon services personally, this factor weighs in favor of employee status because presumably the employer is interested in the method used to accomplish the work as well as in the results.
•Hiring, supervising and paying assistants. If the business owner hires, supervises and pays assistants, this factor generally shows control over the workers on the job. If, however, one worker hires, supervises, and pays assistants pursuant to a contract under which the worker agrees to provide materials and labor and under which the worker is responsible only for the attainment of a result, independent contractor status is indicated.
•Continuing relationship. A continuing relationship between the employer and the worker weighs in favor of an employment relationship.
•Set hours of work. This is a factor indicating control and, therefore, an employment relationship.u
•Full time required. If the worker must devote substantially full time to the business, an employment relationship is indicated because the employer has control over the amount of time the worker spends working and therefore can restrict the worker from doing other gainful work. An independent contractor would be free to work when and for whom he or she chooses.
•Doing work on the employer’s premises. If the work is performed on the employer’s premises, that factor suggests control over the worker, especially if the work could be done elsewhere. Work done off the premises indicates some freedom from control.This fact alone, however, does not mean that the worker is not an employee. The importance of this factor depends on the nature of the service involved and the extent to which an employer generally would require employees to perform such services on the employer’s premises.
•Order or sequence of work. If a worker must perform services in an order or sequence set by the employer, that factor shows that the worker is not free to follow the worker’s own pattern but must follow established routines and schedules of the employer. Thus, this factor weighs in favor of an employment relationship.
•Oral or written reports. If oral or written reports are required, this indicates a degree of control by the employer, and, thus, an employment relationship.
•Payment by hour, week, month. Payment by the hour, week, or month generally points to an employer-employee relationship. Payment by fee generally indicates an independent contractor relationship.
•Payment of business and/or traveling expenses. If the employer pays the worker’s business and/or traveling expenses, this factor weighs heavily in favor of an employer-employee relationship.
•Furnishing of tools and materials. If the employer furnishes significant tools, materials, and other equipment, this tends to show the existence of an employment relationship.
•Significant investment. If the worker invests in facilities that are used by the worker in performing services and are not typically maintained by employees, that factor tends to indicate independent contractor status. Lack of investment in facilities indicates dependence on the employer and, therefore, the existence of an employment relationship.
•Realization of profit or loss. The worker’s ability to realize a profit or suffer a loss is indicative of independent contractor status. In other words, if the worker is subject to real risk of economic loss due to significant investments or bona fide liabilities for expenses, this factor indicates that the worker is an independent contractor. The risk that the worker may not be paid for his or her services is not a sufficient economic risk to support independent contractor status.
•Working for more than one company at a time. If a worker performs services for a variety of unrelated persons or companies at the same time, he or she is most likely an independent contractor. It is possible, however, that an individual who performs services for more than one person or company may be an employee of each of those persons or companies.
•Making services available to the general public. If a worker’s services are available to the general public on a regular and consistent basis, this factor weighs in favor of independent contractor status.
•Right to discharge. If the employer has the right to discharge the worker in question, this factor indicates that the worker is an employee. A person is an independent contractor if he or she cannot be fired if he or she produces results that meet contract specifications.
•Right to terminate. If the worker has the right to end his or her relationship with the employer for whom the services are performed at any time without incurring liability, this factor indicates an employer-employee relationship.

The above factors are common-law rules that the Internal Revenue Service looks at in determining whether an individual is an employee or an independent contractor. None of the factors discussed above, standing alone, will determine independent contractor or employee status. Each situation is considered on a case-by-case basis, and the IRS, the Minnesota Department of Revenue, and the Minnesota Department of Employment and Economic Development each assign different weights to each factor. The most significant factor with all agencies, however, is the business owner’s right to control the individual’s method or manner of performance. If the business owner has the right to control the method or manner of performance, then the individual is most likely an employee. If the business owner has the right to control the results of the work but does not have the right to control the manner and means of accomplishing the result, the individual is most likely an independent contractor.
 
Joe N. Obody said:
So I looked that up this morning, MN state laws/definitions. I have never seen such an issue to be so indeterminate and gray zone as it pertains to actors to be involved in a short film or a no-budget indie feature film.

...
In favor of 'ind contractor', I would be working around the schedules of my actors, weekends, etc so they keep their normal day jobs; there is no 'training' of actors as they already know their craft; there is no integration-- the actor acts then the business proceeds without them as the film is edited, sold, etc.; there are no 'set hours of work' in the sense that i would be working around the schedules of the actors, not like they have to show up 9-5 M-F; their is no 'Full time required'-- actors would be involved for 2-10 days total depending on their role; actors do not work on 'employer's premises', rather they work on various scene locations; there is no 'continuing relationship'; no 'oral or written reports'; no payment by day/week/month-- payment would be by the gig, and if the gig is not complete by the actor then that actor incurs a liability (favoring indep contractor status) by not receiving their gig pay; actors work for more than one company at at time, either for their day job M-F job or for other indie films, favoring indep contract.
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Unfortunately I believe the actors would be considered 'employees' simply for the fact that once 'on set' they are in fact under the direction of the director... unless the film is consisting entirely of improv work and you just setup the camera and pointed it at the performer, and moved as required to keep the performer in frame.

While it may be that time for shooting, place of shooting, and all that goes on with film making is not set in stone for most projects of the nolo budget variety... once the director and actors are in the same place at the same time, and the director... well... directs... there is an employee relationship created.

In another thread on the topic of "unpaid interns" when looking at the federal labor law, it seems that all nolo budget films have situations that are potential for labor law violations. (In fact in looking into it even 'founders' of a start up company may be classed as 'employees' despite their forgoing 'pay' in lieu of 'a piece of the company'...). Further 'volunteering' is not possible for a 'for profit' business. You mentioned setting up an LLC, which is a business structure, and as such one has services provided by either employees or independent contractors. The only way I see 'getting around' this is if there is a non-profit 'acting organization', which the actors can 'volunteer' for, and then the organization provides the actors to the film maker, perhaps for a $1 donation to the non-profit benefit... but perhaps no money need be exchanged... in any case, only then is the filmmaker sort of not in an employer/employee relationship... well... until the lawyers get into it... again in looking into this... Microsoft was sued by a gang of 'independent contractors' a number of years ago, over their 'effective' employee status. The case went thusly...

Microsoft used the services of a large number of workers who where designated 'independent contractors', which the worker 'agreed' to. Comes the IRS, after the IRS determines that the 'independent contractors' are not in fact IC, but 'regular employees', Microsoft 'hires' some set of the workers as employees, and then tells the rest to 'sign up with a temp work service' and perhaps MS would obtain their services via the temp agency. A number of those not 'hired' outright sued Microsoft for 'fringe benefits' and other compensation that was not given them while they were working as 'employees' despite both parties during that period considered the status to be 'independent contractorship'...

The pay out from MS was about $93M...

How this would play in the bushleague of nolo budget film making would probably work in, is if the film actually was successful and you the filmmaker did in fact receive a 'profit'... According to my non-lawyer reading of the Federal Labor law... anyone who works on a film is in fact an employee, unless they are providing services via some other business, for which they are an employee...

Therefor any employee is 'entitled' by law to have minimum pay, ($7 or so bux an hour these days...), and depending on state law, disability insurance/unemployment insurance, etc. paid...

And what's more, they could file for unemployment or disability, if there was an accident, etc.

-------------

Personal experience time... not in the film industry... but 'startup'... about 14 years ago I and a partner 'started up' a business. We had an accountant who could come in and update the books, make out checks etc. all under 1099-independent contractorship. At some point the business income no longer could pay for the accountant... she went to the unemployment office, filed for partial benefits, and that resulted in an investigation about whether she was in fact an 'employee' or 'independent contractor'... such questions as 'when/where/whatdirection' etc. were asked. Since the woman came to the office, performed work there, took 'direction' while there, etc. the state determined she was a 'defacto employee' and cost us money that should have paid 'other bills'...

On the other hand, had we taken our financial papers to her, she 'worked' on them at whatever time, where ever, and however... that would have supported the 'independent contractor' status... and saved us some bux...

Even then my 'working for free' would have still been classed as 'employee' if it were not for the fact that I set up my workplace in my house, worked there most of the time, and only showed up at The Office when meeting potential customers or vendors. And I did send in 'bills' to the business for chunks of 'work' rather than hourly work, as well as materials if any purchased.
 
I met with the IRS yesterday, even they would not give me an answer as to whether actors are ICs or Employees. Of course you are held to penalties and interest and all that if you choose incorrectly. (wtf? is up with THAT) There are a set of criteria and questions to ask, bit of a gray zone, and they would not answer the question. They did say that the IRS would not get involved and such unless the actor tried to claim unemployment insurance or contest tax write offs for the gig, etc. I finally decided to just have actors be volunteers, for such a small project, and the IRS said no problem having them be volunteers, even if a for-profit (potentially). One can of course reimburse volunteers for reasonable expenses (gas, mileage wear and tear, clothing cleaning costs, meals). On a larger film project I would of course go with employees I believe, and use a payroll service.
 
At least for California, the advice djkarn105 gave (and received) is absolutely wrong. The duration or short time limits of the job are largely irrelevant. But that old post was also in 2011, and in 2012 some significant revisions were passed in CA law increasing penalties on employers misclassifying employees as independent contractors.
There's a big enough industry in CA that by now, on the legal side of things, there appears to be a consensus that below-the-line crews as well as actors are generally employees. So if someone wanted to sue you for that they probably could, and win.

What happens in reality? That's a different story... There's still a huge amount of work done as independent contractors. But I'm in my 30's now and care more about my income, disability funds and such, not to mention just having reasonable work terms like meals and overtime when you work a 15-hour day.

Some resources from wiser people than me (entertainment lawyers and payroll experts):
http://www.abspayroll.net/payroll101-hiring-independent-contractors.html
http://www.filmmakingstuff.com/independent-contractor-or-employee/
 
What I do not see here is probably the biggest issue. Intent.

If you are calling someone working for you an independent contractor to beat paying taxes or other laws, you are likely going to regret it.

Also in that long list of ways of checking it, what is missing is that they do not go by one or two of them, but if you are doing a lot of them, watch out. For example, as a photographer I was definitely an independent contractor, but I had to be there when and where the client wanted me, because there were a lot of constraints of that time. I mean if you are photographing a wedding you have to be at the church when the wedding is going on, not in the park next tuesday.

More to the point an actor has to be in front of the camera when it is rolling if he is in the scene, that does not make him an employee. Now if he has to be on the set at 7am and take a 1/2 hour lunch every day at 11am, then he is probably going to be considered an employee.

Unfortunately these types of thing are not cut and dried. Some common sense is needed.

Another thing, many states are going to require workman's comp for employees and volunteers, but not for contractors.

Need I say, I am not providing legal advice here?
 
The answers I see here, remind me of why we hire CPA firms. Tax law is often very grey and difficult to understand, even for professionals. That is why there are tax courts. There is also a matter of intent and duration. as well as contractual agreement.
 
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