Argued and submitted on March 04, 2013.
Office of Administrative Hearings T71202.
Robyn Ridler Aoyagi argued the cause for petitioner. With her on the briefs was Tonkon Torp LLP.
Judy C. Lucas, Senior Assistant Attorney General, argued the cause for respondent. With her on the brief were John R. Kroger, Attorney General, and Anna M. Joyce, Solicitor General.
Before Wollheim, Presiding Judge, and Duncan, Judge, and Nakamoto, Judge.
Petitioner Portland Columbia Symphony seeks judicial review after an administrative law judge (ALJ) affirmed a notice of tax assessment that the Employment Department issued to petitioner. The ALJ determined that petitioner, a community orchestra, had employed musicians and had failed to pay the required unemployment taxes on their wages. In its petition for judicial review of the ALJ's order, petitioner contends that its musicians were independent contractors whose compensation was not subject to unemployment tax. We conclude that the ALJ misapplied the independent contractor statute, ORS 670.600(2), and that the order must be reversed and remanded.
We state the following facts consistently with the ALJ's factual findings and uncontroverted evidence in the record. See AGAT Transport, Inc. v. Employment Dept., 256 Or.App. 294, 296, ___ P.3d ___ (2013).
1. The orchestra
Petitioner is a non-profit organization that stages musical performances. It was originally formed by musicians in 1986, after Lewis & Clark College eliminated funding for its adjunct community orchestra. Petitioner, which operates as a 501(c)(3) organization, is overseen by a board of directors that handles budgetary issues, hires a conductor, and approves the musical programs developed by the conductor. Petitioner typically presents five different musical programs per season, with two performances of each program.
Initially, petitioner was an all-volunteer orchestra whose musicians performed for free. That changed in 1990, however, when the local musicians union, the American Federation of Musicians #99 (AFM), convinced petitioner to start paying union members who performed for the orchestra. Since that time, the orchestra has included both volunteer members and paid AFM members. The paid members fill what are called "core" positions in the orchestra.
For many years, petitioner's core musicians worked without written contracts, but in 2005 petitioner began entering into signed agreements with those performers. The contract form had been drafted by members of the orchestra who also were lawyers. That standardized contract, titled "MUSICIAN INDEPENDENT CONTRACTOR AGREEMENT FOR CORE PLAYER, " states that petitioner's "purpose" as a community orchestra is to "present a series of public classical music concerts" during a scheduled concert season, and explains that petitioner seeks to "engage as independent contractors a full complement of musicians necessary to present the concert series." For their part, the musicians must agree to attend all rehearsals and concerts, prepare for rehearsals and concerts to the satisfaction of the conductor and section leaders, and abide by the terms of petitioner's written personnel policy. The personnel policy is established (and can be amended) by a committee composed of the conductor and certain musicians--namely, the section leaders and designated "personnel managers."
Petitioner's core members are paid a flat fee per "service." For each program, rehearsals and concerts are considered separate services, so core musicians are typically paid for six or seven services per program (four or five rehearsals and two concert performances). For services performed in the Portland area, the standard fee for section leaders ("first chairs") is $41 per service, and $30 for other musicians ("side persons"). For services outside the Portland area, the musicians receive an additional $20 per service. Although most paid members receive the standard fee, it is possible for individual musicians to negotiate higher fees.
Both by the nature of the endeavor--coordinated musical performances--and under the terms of the standardized contract and personnel policy, petitioner sets the content and scheduling of rehearsals and concerts. Petitioner's conductor, who works under contract, is the artistic director of the orchestra and makes recommendations to the board with regard to programming, including suggestions as to guest performers or soloists. It is the conductor's job to blend the skills of individual musicians into quality performances throughout the season. If a musician is not performing up to the conductor's or the section leader's standards, the personnel policy states that the musician will be notified of the performance problems and that, if the problems persist, the musician's contract will be terminated and the position will be opened for audition.
Petitioner's performance season runs from October through the following May, and includes approximately 10 concerts and 20 or 25 rehearsals (five rehearsals per program for strings, and four for other instruments). Petitioner may cancel or reschedule performances, and core musicians must agree to make a good faith effort to attend any additional or rescheduled rehearsals or concerts. The personnel policy states that rehearsals will not extend past two and a half hours, with a 15-minute break halfway through. Musicians are expected to be able to play the assigned music at the rehearsals and typically spend 40 to 60 hours practicing alone for each program. They are allowed only one planned absence from a rehearsal per season. The personnel policy provides that, in the case of an absence due to emergency or illness, the musician will not be paid for the service.
In the event that a musician cannot attend a scheduled concert, the musician must follow the procedure set forth in the personnel policy regarding absences. The policy designates two of the core musicians as personnel managers: one for violins, and another for all other instruments. If a musician will be absent, the musician must notify the appropriate personnel manager for his or her section. The musician can elect to hire a substitute, subject to petitioner's right to review the substitute's qualifications and veto the hiring. If the musician elects not to hire a replacement, or prefers that petitioner itself hire the replacement, petitioner has the right to do so. As a practical matter, whether a replacement is even necessary depends on the section. Because of the number of violins in the orchestra, absent violinists typically are not replaced; however, musicians for the other sections of the orchestra usually are. If a replacement is hired, the replacement generally is paid directly by petitioner, at the same rate that would have been received by the contracted musician.
The musicians themselves provide almost all of the necessary equipment for their performances. Although petitioner provides sheet music for the programs, the musicians must provide instruments and music stands. In general, the musicians own their instruments, many of which were purchased for thousands of dollars and cost hundreds of dollars each year to maintain. Musicians also must decide whether it is necessary to purchase performance aids, such as recordings of the musical piece, to prepare for rehearsals and concerts.
2. Representative examples of musicians
In the proceedings below and throughout judicial review, the parties have focused on four musicians and treated them as prototypical of the orchestra's core performers. Because the ALJ's order affirming the tax assessment is predicated on the assumption that those musicians are representative of the other paid performers, we briefly recite the ALJ's factual findings as to their particular circumstances.
a. Marty Hernandez
Marty Hernandez has been a violinist in petitioner's orchestra since 1987. She owns three violins and uses one purchased in 2003 when performing with petitioner's orchestra. She practices playing her instruments in her living room, and she deducts the expenses for violin maintenance on her tax returns. She does not keep track of her travel expenses when performing for petitioner, nor does she take tax deductions for those travel expenses.
For part of the time she was playing with petitioner's orchestra, Hernandez held a job as a property manager. She also received other income as a musician during that time. Between 1995 and 2009, Hernandez played for the Newport Symphony Orchestra. She signed a contract with the Newport orchestra and was paid a set fee, a travel fee, and mileage reimbursement for that work. In 2010, Hernandez was also paid a set fee for a couple of "gigs" that she found by networking over the Internet.
b. Marc Bescond
Marc Bescond plays the bass in petitioner's orchestra. He did not negotiate his pay and was not aware that the fee was negotiable. His understanding was that, as a member of an ensemble, he could not deviate from the vision and interpretation of the music as explained by the conductor.
Besson purchased his bass in the early 1990s in France, and he pays to maintain the bass and bow. He does not take tax deductions for the maintenance, however, because he would incur the costs regardless of whether he performed for ...