Sad Song for Hospitality Businesses

The New Hampshire Supreme Court issued an opinion on May 8, 2014 in the case of Appeal of Niadni, Inc. d/b/a Indian Head Resort Motel (New Hampshire Department of Employment Security) finding that a musician who frequently played at the resort was an employee and eligible for unemployment benefits.  The musician had negotiated a regular rate of pay.  He provided his own instruments and selected the songs he would play.  He performed not only at the resort, but at many other venues from 1980 to June of 2012 when he had his last booking at the resort.  The resort argued that the musician was not an employee because he was an independent contractor and fit within the statute’s exemption for independent contractors.

There are three requirements which must ALL be met for an individual to fall within the independent contractor exemption under the New Hampshire Unemployment Compensation law:

The individual has been and will continue to be free from control or direction over the performance of the services both under their contract and in fact; and
the service provided is either outside the usual course of the business for which the service is performed, or the service is performed outside of all places of business of the enterprise for which it is being performed; and the individual is customarily engaged in an independently established trade, occupation, profession or business.
The issue in this case was whether the services provided were outside the usual course of the resort’s business.  (A clear cut example of services which would be outside the usual course of the resort’s business is roofing services.  The resort could hire an independent contractor to replace the roof on the resort.)  In this case, the Court found that the resort failed to prove that the live music performances provided by the musician were outside the usual course of business of the resort.  The Court observed that the resort offered live music sixty to seventy percent of the nights that it was open.  The musician was a regular performer, appearing at the resort three hundred times in the last two years.  His likeness and the name of his musical acts were in several of the resort’s advertisements.  The Court concluded that his performing was not incidental, but rather integral to the resort’s business.

Although decided in the context of a hospitality business, the decision gives guidance in what will be considered an independent contractor for purposes of unemployment compensation.  All New Hampshire business owners should carefully review whether individuals providing services for their businesses would fit within the exemption under the Unemployment Compensation Law as interpreted by this case.

Beth is the editor of the newly released A Practical Guide to Organizing a Business in New Hampshire, (MCLE, Inc. 2014).  She was an adjunct instructor at the University of New Hampshire teaching Hospitality and Employment Law.  She has been a legal seminar panelist on employment law, business entity selection, and limited liability companies, as well as real estate, foreclosure, and repossession.