Nightclub operators, concert promoters and musicians around the state are singing the blues over an effort by the Montana Department of Labor and Industry to enforce a seemingly obscure statute that governs the relationship between performers and the people who pay them.

It is a complicated regulatory issue – the kind that most of us would prefer to leave to our accountants.

But the cultural fallout could spill into every bar, bar mitzvah, community center and concert hall in Montana.

Some people involved in the Montana music business say that if the dispute isn’t resolved soon, it could all but spell the end of live concerts in the state.

“I don’t think it would be financially viable for us to do live shows, to be honest,” said Scott McIntyre, co-owner of the Badlander and the Palace Lounge in downtown Missoula.

“These arbitrary regulations will, in effect, put most if not all musicians in this market out of work,” added Jack Souligny, secretary and  treasurer of the Musicians of Western Montana Local 498 of the American Federation of Musicians.

At issue is the seemingly mundane question of whether a musician who receives money for a performance should be considered an employee or an independent contractor.

In 2005, the state of Montana passed a law clarifying that paid workers – from ditch diggers to fishing guides to musicians – are generally presumed to be regular employees of the person or company who pays them, unless those workers have applied for and received an independent contractor exemption certificate from the state of Montana.

If a worker is a regular employee, he or she must be covered under a workers’ compensation insurance policy, which pays medical expenses and lost wages should that person be injured while on the job.

Employers must also withhold state taxes and pay unemployment insurance for all regular employees – even if those employees only worked for one hour of one night in a year, said Keith Messmer, chief of the Workers’ Compensation Regulation Bureau at the Department of Labor and Industry.

Obtaining an independent contractor exemption certificate isn’t trivial, nor is it free. Individuals must prove, via a point system, that they qualify as an independent contractor by the state’s definition; they must also pay a fee of $125 every two years for the certificate.

Therein lies the rub, as far as touring or fledgling bands are concerned, said Colin Hickey, an independent concert promoter who has booked shows at nightclubs in Missoula for several years.

“Trying to get touring bands to apply for something like that just so they can play one or two shows in Montana, that’d be impossible to manage,” said Hickey. “Bands have enough trouble just getting organized enough to practice.”

But if it’s a hassle and expense for musicians to get certified as independent contractors, it is an all-out paperwork nightmare for nightclub owners to keep track of every musician who sets foot on a stage.

For a nightclub that hosts two bands a week, that’s potentially eight or more new “employees” every week – or 416 additional W-2 forms to send out at the end of the year.

“Running a music club is not like a million-dollar business in Montana,” said Nicole Garr, co-owner of the Top Hat Lounge in Missoula. “Anything that’s being taken out of that for workers’ comp or whatever, that’s less for the musicians – who can’t get paid enough as it is.”

“It isn’t convenient, I would acknowledge that,” allowed Messmer, of the Department of Labor and Industry. “The bookkeeping definitely isn’t easy. … But when it comes to workers’ compensation, if someone gets hurt while they’re playing at a bar, they’ll have medical expenses covered and be eligible for wage reimbursement.”

Sam Porter thought he was doing everything by the books.

For years, his Bozeman-based company, Porterhouse Productions, had produced events around the state, including the Montana Rockies Bioneers Conference and performances by Ani DiFranco, Michael Franti and other entertainers. Porter is no stranger to the complicated contracts and other paperwork challenges involved in running such events.

So when his company was audited last year by the Department of Labor and Industry, Porter felt confident that he wouldn’t run into trouble.

But according to auditors, Porter had failed to demonstrate that each individual musician who received payment from his company was certified as a registered independent contractor with the state.

“This appeared out of the blue for us; we had no idea this was even required,” said Porter.

Porter’s education ultimately proved expensive. Last month, his company received a bill for $1,097.32 from the Department of Labor and Industry. That amount included a $200 fine plus unpaid premiums charged at double their normal rate.

Porter was shocked.

“As far as I have been able to discern, none of the artists I work with – and these are people who tour all over the world – have ever had to deal with this in any other state,” said Porter.

Porter is hardly alone in his confusion and frustration over the issue. Of nearly a dozen musicians, venue operators and concert promoters contacted for this story, none voiced confidence that they fully understood what is expected of them by the state of Montana.
Several voiced outright misperceptions about the laws.

But with stories like Porter’s surfacing around the state, people involved in the music business are worried what they might face. The Department of Labor and Industry can levy fines of up to $1,000 per day against both musicians and the people who hire them, if they are found to be in violation of the laws governing workers’ compensation exemptions.

No fines of that size have been levied so far, said Dallas Cox of the Independent Contractor Central Unit.
But the option remains.

“Our main goal is to get the word out there right now,” said Cox. “Nobody wants to have money taken out of their pockets. But people need to get into compliance.”

Porter, for one, feels that the risks of tripping up on the regulations are too great. He has already significantly scaled back the number of concerts he plans to produce this summer in Montana.

“I think it’s a shame,” Porter said, “because we’re the people taking the risk to keep the arts alive statewide.”

Reporter Joe Nickell can be reached at 523-5358 or at jnickell@missoulian.comThis e-mail address is being protected from spambots. You need JavaScript enabled to view it .