Live events sector
A class action lawsuit in the States has put the focus on the use of volunteer labour at music festivals, something many large scale music events depend on. According to ClassAction.org, a new lawsuit is aimed at Live Nation and its festival promotion partner Insomniac Events, and has been brought by an Elizabeth Valladares, who volunteered at the Californian edition of dance music festival Nocturnal Wonderland in return for a free ticket to the festival
The plaintiff claims that the event’s organisers violated America’s Fair Labor Standards Act by recruiting volunteers to “carry out the work of paid employees”. Federal labor law defines a volunteer as an individual who “performs hours of service for a public agency for civic, charitable, or humanitarian reasons, without promise, expectation or receipt of compensation for services rendered”. ClassAction also note that California’s state labor laws would also apply to workers. The lkawsuit alleges that Valladares spent the entire time at the festival (12.30pm to 02.30am) in the general store selling goods to customers, except when taking a single meal break, and had no time off to enjoy the festival. The lawsuit claims Insomniac is taking advantage of volunteers’ love for music, “leveraging their eagerness to attend these events against their willingness to work for free.”
The argument here is that the work done by the volunteers meant that they could be, in essence, classed as employees – however they might be classified by the festival’s promoters – and are therefore subject to employment law. ClassAction noted that volunteers had to leave a deposit with the promoter which would be retained should they not complete their duties, and their driving licence too. If classified as employees then volunteers would be covered by rules relating to minimum wage payments, overtime and break entitlements – something which would have major ramifications on the US festival business as well as also possibly limiting internships and opportunities.
In the UK HMRC’s position was explained in February 2014 with a crackdown which had a specific reference to unpaid internships in the music industry in the context of the minimum wage. HMRC announced that it has written to at least 35 music industry firms to explain the rules regarding unpaid labour and that if they are not paying their interns the minimum wage they might be breaking the law. This followed an announcement by Prime Minister David Cameron before Christmas 2013 of a crackdown on companies who do not properly pay employees, with an increase in penalties now in place with a maximum fine of £20,000 per unpaid worker and 100% of that worker’s wages.
Michelle Wyer, Assistant Director of HMRC’s National Minimum Wage Department said at the time: “Non-payment of the national minimum wage is not an option, it’s the law, and we’re letting the music industry know that we’ve got them in our sights. If they are not playing by the rules, now is the time to put things in order. Last year we fined over around 800 employers, so our message is clear: if you are not paying your interns, but should be, come forward now and put things right to avoid a penalty”.
With no legal definition of an ‘intern’ there are some issues for HMRC to clarify. However, The National Minimum Wage Act 1998 states that ‘workers’ must be paid the minimum wage, unless they are:
• On a government-accredited apprenticeship.
• Participating in certain kinds of work-based training schemes.
• A student doing their first degree or a teacher training course who must complete a work placement (that’s no longer than twelve months) as part of their course.
- Volunteers employed by a charity or other voluntary organisation.
• In certain other circumstances, including homeless people working in exchange for shelter.
Workers would almost certainly extend to anyone with a written or oral contract to provide work or services (as “employees” are defined in section 230 of the Employment Rights Act 1996 as are workers – the latter as someone with a contract of employment or who personally performs work and is not a client or a customer:
The test has classically been one of ‘control’ and a definition between contracts for service (eg an employee) and contracts for services (a freelancer). One of the leading cases is a tax case about ballet dancers who danced at Saddlers Wells theatre in London (Fall v Hitchen  STC 66) which found that a contracted dancer was indeed an employee – although that case also shows that HMRC don’t always understand – or even if they do understand – actually apply the law. Pennycuick VC’s decision was implemented 17 years late! This case followed the decision in Market Investigations Ltd v. Minister of Social Security (1969) 2 QB 173 where Cooke J said when determining if someone were an employee (rather than self-employed) the fundamental test to be applied is this: “Is the person who has engaged himself to perform these services performing them as a person in business on his own account?” If the answer to that question is “yes,” then the contract is a contract for services. If the answer is “no,” then the contract is a contract of service. No exhaustive list has been compiled and perhaps no exhaustive list can be compiled of the considerations which are relevant in determining that question, nor can strict rules be laid down as to the relative weight which the various considerations should carry in particular cases. The most that can be said is that control will no doubt always have to be considered, although it can no longer be regarded as the sole determining factor; and the factors which be of importance are such matters as whether the man performing the services provides his own equipment, whether he hires his own helpers, what degree of financial risk he takes, what degree of responsibility for investment and management he has, and whether and how far he has an opportunity of profiting from sound management in the performance of his task.”
Pennycuick VC said this in Fall v Hitchen: “In the present case, it seems to me that virtually all the relevant factors point to this being a contract of service. The taxpayer is engaged to work for a minimum period of rehearsal plus 22 weeks, and thereafter until the contract is determined by a fortnight’s notice on either side; he is engaged to work full‑time during specified hours for a regular salary; the company has the first call upon his services, and indeed the exclusive call subject only to this, that its consent to the taxpayer performing elsewhere should not be unreasonably withheld; and then, again, the company provides and owns the gear used by the taxpayer with one exception. All these indicia point to the conclusion is that he is not a person who is performing those services in business on his own account and there are really no indicia to the contrary”. Also see Hall v Lorimer EWCA Civ 25 where a relevant factor considered by the Court of Appeal was whether the individual is dependant or independent of a particular paymaster for the financial exploitation of his talents – here it was significant that Mr Lorimer, a vision mixer customarily worked for 20 or more production companies and that the vast majority of his engagements lasted for only a single day. Mr Lorimer was found to be self-employed.
The Institute For Public Policy Research has noted a series of criteria which distinguish an ‘internship’ from simple work experience, voluntary work or work shadowing schemes, participants in the former likely counting as a ‘worker’ in the eyes of the law. Features of such an internship might include a placement that lasts between three and twelve months, working to set hours (often full-time), being required to complete specific tasks within set timeframes, and undertaking tasks that would otherwise be carried out by a member of staff.
In February Employment Relations Minister Jenny Willott said: “The music industry is often seen as a glamorous industry to work in, particularly for young people. However, that is no excuse for interns not to be paid at least the minimum wage if they are employed as a worker. We need to make sure that interns who want a career in music are getting a fair deal and are not being exploited”.
http://www.completemusicupdate.com/article/hmrc-targets-music-firms-in-unpaid-internship-crackdown/ and ClassAction http://www.classaction.org/blog/insomniac-lawsuit-whats-the-problem-with-recruiting-unpaid-volunteers
Hall v Lorimer http://www.egos.co.uk/cases/HALL_v_Lorimer.htm
The position of pupil barristers was decided in Edmonds v Lawson  EWCA Civ 69 http://en.wikipedia.org/wiki/Edmonds_v_Lawson holding that there was no contract of employment and the pupil was not a worker – and that the minimum wage could not apply: post decision the Bar Council revised its rules to provide for a minimum payment to pupil barristers.
HMRC website see http://www.hmrc.gov.uk/manuals/vtaxpermanual/vtaxper34000.htm