The Event Industry’s Temp Workforce is Under Scrutiny

Targeted enforcement by states, combined with threats of reporting by disgruntled contractors, is putting pressure on event agencies that use temporary workers instead of employees to avoid incurring the costs of overtime, benefits, and tax payments.

The pressure has only been exacerbated by the economic slowdown. Agencies are being expected to flex their businesses in response to growing demand for temp workers by corporate clients who are unwilling to add headcount. Adding staff — and the costs that go along with that — creates pressure to increase pricing, making it harder to remain competitive.

Federal and State Oversight

The events industry sits between two areas that are being targeted for misclassifying workers: hospitality and staffing.   

The oversight of employee classification occurs at both the federal and state levels. The U.S. Department of Labor (DOL) and the Internal Revenue Service (IRS) can launch joint federal/state investigations — but often these are not made public. It’s more common for a lawsuit to be initiated because of worker complaints or when they file a Form SS-8, which asks the IRS to make an official determination of their status based on the facts of the working relationship.

The Trump administration is seeking to rescind the 2024 gig worker rule under President Joe Biden, which created new guidance for how the DOL evaluates cases and made it harder for companies to classify workers as independent contractors. The rule is subject to a 60-day comment period ending on April 28.

However, courts are not required to follow DOL guidance.

Several states also have laws in place to protect temporary workers, including California's much-publicized AB5, passed in 2019. These states rely on the ABC test to determine whether an individual should be classified as an employee, a series of questions including whether the service being performed is outside the usual course of the hiring company's business.

Event Agencies at Risk

Issues can arise when a hiring company has a mixed bag of contractors and employees doing the same thing, said Tracy Judge, founder and CEO of Soundings Connect, which places freelance talent.

“You are saying you are in the business of delivering events and you are hiring contractors that are your core business, but you are also paying people on your team as employees who are doing that same job.”

At The Opus Group, freelancers are classified as temporary employees by default, shifting to contractor status only when criteria are clearly met, said David St. Martin, VP, supplier operations. "If the role falls outside our usual course of business, the individual is classified as a contractor. Otherwise, we evaluate factors such as tax status, state laws, and scope of work to determine proper classification."

In the end, it’s a business decision, said Judge. “I work with companies and tell them how I think it should be done and what their risk is. They make that decision.”

Two separate California cases regarding hospitality and event workers — against GigSmart and Qwick — have resulted in penalties and forced the companies to reclassify workers from contractors to employees. Another ongoing case is against WorkWhile, an app that places event temps, among other types of gig workers.

“Once they have gone after one company in an industry, they’re going to start looking at the others,” said Judge.

TDs Push Back

To protect themselves, some meeting and event marketing agencies are asking contractors to convert their businesses to LLCs with an S Corp designation if they want to continue working with them.

Contractors feel these requirements are unfair. For one travel director based in Florida, the cost was $1,200.

“Many of us in the travel and event staffing industry operate as small independent businesses,” said an anonymous TD. “This means thousands of dollars in additional accounting, payroll, and compliance costs every year — even though federal and state law do not require it.”

The temptation to report the hiring agency is always there. “Anything over 40 hours is supposed to be paid overtime per federal law,” said one event contractor in an online chat. “They can try and label it however they want, but you are considered an employee for the week you work for them. One call to the labor board and a complaint will clarify that.”