Models: Employees or Independent Contractors?

Employee classification has “increasingly become a subject of debate both at the federal and state levels.” Steven Cohen & William B. Eimicke, Independent Contracting Policy and Management Analysis, 15 (Aug. 2013).  Particularly problematic has been the classification of fashion models as independent contractors or employees.

Most recently, a model filed suit against her agency in New York, demanding back wages she believes she is entitled to as a result of her agency allegedly misclassifying her as an independent contractor instead of an employee.  Barbara Ross, Model Nekesha McCary Sues Her Agency For Labeling Her as Independent Contractor, N.Y. Daily News (Apr. 16, 2015, 4:10 PM).

Employee or Independent Contractor?

Fashion models are generally regarded in the United States as independent contractors. However, because a model is characterized as an independent contractor under a contract, does not necessarily mean that he/she is correctly classified as an independent contractor.

There has been no strict test established in New York to determine the classification between an employee and independent contractor, and state and federal tests differ in their identification criteria. Ariel Sodomsky, Models of Confusion: Strutting the Line Between Agent and Manager, Employee and Independent Contractor in the New York Modeling Industry, 26 FORDHAM INTELL. PROP. MEDIA & ENT. L.J. 269, 288 (2014).

The two tests generally followed are the Common Law Test and the Economic Realities Test. Steven Cohen & William B. Eimicke, supra at 24. This article will not discuss these tests in detail. For further discussion and comparison of these tests see Steven Cohen & William B. Eimicke, Independent Contracting Policy and Management Analysis, (Aug. 2013).

Generally, determining whether a worker is an employee or independent contractor involves “the degree of supervision, direction, and control exercised over the worker, not only in regard to the results but also the means, manner, and method of services provided… Courts in New York have found that no single factor or group of factors will conclusively define whether a worker should be classified as an employee or independent contractor” Sodomsky, supra at 288, citing Tracy A. Cullen, What a Tangled Web We Weave: The Independent Contractor Snarl, 15 N.Y. EMP. L. LETTER 1 (2008).

New York Labor Law Section 511

Under New York Labor Law Section 511, models are classified as employees for purposes of unemployment insurance.  Which leaves open the question: if fashion models are considered employees for unemployment insurance purposes, should models be considered employees for employment purposes?  Most modeling contracts, however, classify models as independent contractors rather than employees of the modeling agency. N.Y. LAB. LAW § 511 (McKinney 2014).

Section 511 continues that “when a model performs modeling services for an entity, she is an employee for unemployment insurance purposes if that entity ‘dictates…assignments, hours of work or performance locations and compensates such professional model.’” LAB. LAW § 511; Sodomsky, supra at 291.

A bill has been reintroduced (A.5263, 237th Sess. (N.Y. 2014)) almost each year since 1995 seeking to exclude “professional models” as employees, reclassifying them as independent contractors, and additionally excluding “model manager[s], advertiser[s], person[s], corporation[s], or other entit[ies]” as employers under LAB. LAW § 511. The bill was last introduced in 2014 and was referred to the labor committee. No further action was taken.  

Employee v. Independent Contractor: Pros and Cons

For a worker, there are pros and cons of being considered either an employee or an independent contractor.

Engaging in independent contracting affords flexibility and independence. An independent contractor generally has the ability to choose his/her own work hours, clients, and the manner in which work is completed. Independent contractors are excluded from many personnel policies traditional employees are subject to, and many independent contractors have exclusive ownership over their products and services. Because independent contractors may choose their jobs and clients, independent contractors may have more freedom and control over their economic destiny.

Despite these advantages, there are downsides to working as an independent contractor. Independent contractors are responsible for reporting their own income to the IRS, and may pay their entire Social Security and Medicare taxes, a shared expense for employees with their employers. Independent contractors are not legally entitled to many employment-related benefits and protections as employees because they “lie outside the scope of many government programs that aim to support workers, such as unemployment insurance, tax-advantaged medical insurance, access to collective bargaining, and enforcement of minimum labor standards.” Steven Cohen & William B. Eimicke, supra at 17-19, citing Matthew Bidwell & Forrest Briscoe, Who Contracts? Determinants of the Decision to Work as an Independent Contractor among Information Technology Workers, 52 Acad. of Mgmt. J. 1148 (2009).

Additionally, independent contractors face another major disadvantage – job security. Independent contractors are not protected from employment discrimination or wrongful termination and will not receive unemployment benefits if their contract ends.

While there may be less freedom in being considered an employee, employees are legally entitled to more benefits and protections such as health and disability insurance, and worker’s compensation benefits for workplace injury. Employees receive their net salary after employers have withheld income tax, Social Security, and Medicare tax.

An employee, unless considered “at will,” can be terminated only for good cause and with notice, and will likely be eligible to receive unemployment compensation after lay off or termination. Employees are also covered by state and federal wage and hours laws, such as minimum and overtime, have the protection of workplace safety and anti-discrimination laws, and may form or join a union. Additionally, an employee may receive special training from an employer to improve their job performance.

An employee, however, usually works for only one employer, at the work hours set by the employer, at the employer’s place of business, and accomplishes tasks in the manner requested by the employer under the control and direction of the employer.

Given the above, a more experienced, highly paid model with caché and the leverage to negotiate modeling contracts may enjoy the freedoms afforded by being an independent contractor, while it may be more advantageous for a less experienced, up-and-coming model to be classified as an employee, receiving legal benefits, a stable wage scale, and job security.

Not taken into consideration, however, is the classification of the modeling agency. A complex issue in itself, discussed briefly below.          

What about the modeling agencies?           

Generally, the “type of management contract and the nature of the business entity itself (agency or management company) will depend on the laws of the agency to which the model is signed. Ali Grace Marquart & Doreen Small, Global Area of Fashion Modeling Law Evolves Along with New Forms of Media, in Inside the Minds™ Navigating Fashion Law: Leading Lawyers on Developing Client Brands in a Changing Market and Monitoring Key Legal Developments 23, 24 (2015 ed.).

In New York, modeling agencies are considered management companies. While they receive no cap, management agencies generally receive twenty percent (20%) of models’ commissions, versus agencies, which are capped at ten percent (10%). “New York model management companies perform an array of professional services for [the] models and booking jobs is permitted under the ‘incidental booking exception’ of New York General Business Law Section 171.” N.Y. GEN. BUS. LAW § 171(8) McKinney 2013). Given the amount of control most agencies exert over models, it has been argued that the agencies should be considered employers. See Sodomsky, supra at 294. Another issue raised is whether the client (e.g., a fashion house) should ultimately be considered the employer. These questions have not yet been resolved.

Important Antitrust Settlement Expires

Since 1995, many of the major modeling agencies have operated under “an antitrust consent decree following a 2005 settlement of class action litigation.” Ali Grace Marquart & Doreen Small, supra at 24. The settlement provided for injunctive relief and damages, preventing the agencies from, among other things, joining any trade associations or talking amongst themselves.

On May 5, 2015, the settlement agreement reached in Fears v. Wilhelmina Model Agency, Inc., No. 02-Civ.4911 (HB), 2005 WL 1041134 (S.D.N.Y. May 5, 2005) will expire, allowing modeling agencies to freely communicate. The expiration of the settlement may allow modeling agencies to push for legislation, such as Article 511 (discussed above), to legislatively solidify models as independent contractors.

Solutions and Going Forward       

Clearly, under current law and with the expiring antitrust constraints on modeling agencies looming, fashion models must be more carefully counseled about their election to be classified as an “employee” or as an “independent contractor.” The choice will depend on the specific facts and circumstances of each individual. Over the long term, state law must be clarified.

In France, models are considered both employees and independent contractors. Models are considered employees with regards to their physical work, and independent contractors regarding the use of their image. Consequently, models enter into two different agreements with their agencies.

Other suggestions for clarifying the classification of models as employees or independent contractors include enacting “model-specific employee legislation,” “model-agency statute” in New York, or passing legislation requiring more transparency regarding how agencies should conduct business following the Fears settlement (discussed above). 

* BY Elisabeth Schiffbauer - Medenica Law PLLC.