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Portland Symphony Symphony v. Employment Department

Court of Appeals of Oregon

March 8, 2017

PORTLAND COLUMBIA SYMPHONY, Petitioner,
v.
EMPLOYMENT DEPARTMENT, Respondent.

          Argued and submitted December 22, 2015

         Employment Department T71202;

          Robyn Ridler Aoyagi argued the cause for petitioner. With her on the briefs was Tonkon Torp LLP.

          Judy C. Lucas, Assistant Attorney General, argued the cause for respondent. With her on the brief were Ellen F. Rosenblum, Attorney General, and Anna M. Joyce, Solicitor General.

          Before Ortega, Presiding Judge, and Lagesen, Judge, and Garrett, Judge.

         Case Summary: Petitioner, a symphony orchestra, seeks judicial review of an order assessing unemployment tax, which the Employment Department entered on remand following the decision in Portland Columbia Symphony v. Employment Dept., 258 Or.App. 411, 310 P.3d 1139 (2013) (PCS I). In that decision, the Court of Appeals held that the department had erroneously applied provisions of the independent contractor statute, ORS 670.600, in determining that all of petitioner's paid musicians were employees, triggering petitioner's obligation to pay unemployment tax. On remand, the department deemed 13 of the musicians to be independent contractors but held to its previous determination that the remaining musicians were employees. On review, petitioner challenges, among other things, the department's application of the "significant investment" criterion for an independently established business, ORS 670.600(3)(d). Held: The department erred in its application of the "significant investment" criterion. Petitioner's musicians supply the specialized equipment necessary to perform their work, most notably the musical instruments themselves, which typically cost thousands of dollars to purchase and hundreds more annually to maintain. Moreover, the musicians are in the business of musical performance and the instruments are used for that business. Thus, the record establishes that the orchestra's musicians have made a "significant investment, " within the meaning of ORS 670.600(3)(d), in the business of being musicians. In light of the court's decision in PCS I, petitioner's musicians satisfy the relevant criteria necessary to be considered independent contractors under ORS 670.600 and, therefore, their services are exempt from employment under ORS 657.040.

         Reversed and remanded.

          GARRETT, J.

         Petitioner, a symphony orchestra, seeks judicial review of an order assessing unemployment tax, which the Employment Department entered on remand following our decision in Portland Columbia Symphony v. Employment Dept, 258 Or.App. 411, 310 P.3d 1139 (2013) ("PCS /"). In that decision, we held that the department had erroneously applied provisions of the independent contractor statute, ORS 670.600, in determining that all of petitioner's paid musicians in 2009 were employees, triggering petitioner's obligation to pay unemployment tax. On remand, the department deemed 13 of the musicians to be independent contractors but held to its previous determination that the remaining musicians were employees.

         On review, petitioner makes three assignments of error. The first and second assignments challenge the department's application of two provisions of the independent contractor statute, ORS 670.600(3)(a) and (d). The third assignment raises a procedural challenge to the department's evident decision, on remand, to require an individualized showing as to each musician rather than to treat certain members of the orchestra as representative of the group. For the reasons explained below, we conclude that the record establishes as a matter of law that the orchestra's musicians have made a "significant investment, " within the meaning of ORS 670.600(3)(d), in the business of being musicians. Under the procedural circumstances of this case, and in light of our decision in PCS I, that is sufficient to prove that all the orchestra's paid musicians during the relevant time were independent contractors not subject to unemployment tax. The department's order is reversed.

         Most of the facts are set forth in PCS I and are repeated here (sometimes verbatim) only as necessary to provide context for the specific issues raised in this second appeal.

         Petitioner is a nonprofit organization that presents, in a typical year, five different musical programs, with two performances of each program. The musicians who perform with petitioner include both volunteer members and paid members; the paid members fill what are called "core" positions in the orchestra. For years, petitioner's core musicians worked without written contracts, but, in 2005, petitioner began entering into signed agreements with those performers. The contract states that petitioner seeks to "engage as independent contractors a full complement of musicians necessary to present the concert series." 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. Petitioner sets the content and scheduling of rehearsals and concerts. Petitioner's performance season runs from October through May, and includes approximately 10 concerts and 20 or 25 rehearsals. The musicians themselves provide almost all of the necessary equipment for their performances. Although petitioner provides sheet music for the programs, the musicians provide their own 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.

         Following an investigation in 2009, the department determined that "all of petitioner's core musicians were employees and that petitioner's payments to those musicians constituted wages subject to unemployment taxation. Because petitioner had not paid unemployment taxes on payments to its musicians, the department issued a notice of tax assessment for unemployment contributions for 2009." PCS I, 258 Or.App. at 419 (emphasis omitted). Petitioner contested the tax assessment before an administrative law judge (ALJ), who considered whether petitioner had carried its burden of proving that its musicians met the criteria for independent contractors in ORS 670.600(2). See ORS 657.040(1) ("Services performed by an individual for remuneration are deemed to be employment * * * unless and until it is shown to the satisfaction of the Director of the Employment Department that the individual is an independent contractor, as that term is defined in ORS 670.600."). ORS 670.600(2) provides that, for purposes of ORS chapter 657 (unemployment insurance), an "independent contractor" is a person who provides services for remuneration and who, in the provision of the services,

"(a) Is free from direction and control over the means and manner of providing the services, subject only to the right of the person for whom the services are provided ...

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