Seyfarth Synopsis: Two new California laws are set to significantly affect the entertainment industry: one will deal a giant blow to productions and studios accustomed to hiring independent contractors; the other will give print shoot productions the opportunity to process payments with regular payroll and avoid liability for not issuing payments at wrap.
Some Not-So-Entertaining News
California’s landmark Assembly Bill 5, which requires gig economy workers to be reclassified as employees, will become effective January 1, 2020. Companies throughout California have been furiously exploring options for how their operations might need to be modified moving forward.
AB 5’s Effect on California’s Entertainment Industry
We previously addressed AB 5 as it applies generally, but here we focus on its broad and significant impact on individuals in the entertainment industry who, until now, would have been classified as independent contractors (e.g., those who are not employed full time by studios or production houses).
AB 5 is the legislative response to the California Supreme Court’s April 2018 decision in Dynamex v. Superior Court. AB 5 codifies Dynamex’s “ABC test” to determine whether a worker is an employee or an independent contractor, and in doing so AB 5 extends the ABC test to all Labor Code, Unemployment Insurance Code, and Wage Order claims.
Applying the same language as Dynamex, AB 5, slated to appear in Labor Code section 2750.3, provides that a person receiving payment for labor or services is an employee rather than an independent contractor unless the hiring entity demonstrates all of the following conditions:
- The person is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact.
- The person performs work that is outside the usual course of the hiring entity’s business.
- The person is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.
While AB 5 provides exceptions for various occupations and relationships (these are evaluated under the test laid out in S.G. Borello & Sons, Inc. v. Department of Industrial Relations—as discussed in our previous post), it will be difficult for entertainment entities to fit many of their production crew members into these exceptions.
AB 5 likely sounds the death knell for the ubiquitous loan-out arrangement, as it will be nearly impossible to satisfy the business-to-business exemption or the professional services exemption. As one can imagine, the nature of the entertainment industry makes it difficult to identify key positions that perform work outside a hiring entity’s usual business. Moreover, most workers are not “free from the control and direction” of these entities. Nonetheless, a handful of limited exceptions may apply to at least some in the industry:
- Photographers/photojournalists—Services provided by still photographers are exempt so long as they do not license content to a single hiring entity more than thirty-five times per year. [Note: this does not apply to work on “motion pictures,” including, but not limited to, projects produced for theatrical, television, internet streaming services, commercials, broadcast news, music videos, and live shows.]
- Freelance writers/editors—Services of individuals who do not provide content submissions to a single hiring entity more than thirty-five times per year are exempt.
- Graphic designers
Meanwhile, though, the freedoms associated with being independent contractors will now no longer be available to individuals working as background actors, grip and lighting crews, camera crews, assistant directors, and production assistants.
AB 5 raises several unanswered questions. Does the graphic designer exemption apply to animators or prop houses? Can screenwriters fall under the freelance writers exception? How will AB 5 apply to gig workers such as session musicians, who do not appear to have been contemplated in the same way that film and photo crews were?
But Wait, It’s Not All Rainclouds!
Although many gloomy impacts of Dynamex and AB 5 appear inescapable, the California Senate was also busy this term. A new law, Senate Bill 671, will add a thin silver lining to the cloud soon to hang over other aspects of the entertainment industry. Thanks to SB 671’s urgency clause, the bill became effective immediately upon its September 5, 2019, signing—a respite to entities that use short-term talent and crew, especially those that have faced lawsuits threatening potentially enormous liability.
How SB 671 Is Changing Print Shoot Rules
Under Labor Code section 201, employers generally must pay a discharged employee all earned wages immediately upon termination of employment, which includes the completion of a project (such as wrapping a print shoot). Employers who fail to timely pay termination wages face “waiting time” penalties in the amount of one day’s pay for each day of delay (including weekends) until final wages are paid, up to a maximum of thirty working days’ worth of pay. In recent years, advertising agencies and production companies have been hit by waiting time penalties for delays in paying terminated print models, even where the model was provided to producers, photographers, and casting directors through talent agencies or loan-out agreements.
SB 671, aka the “Photoshoot Pay Easement Act,” will create or amend Labor Code sections 201.6, 203, 203.1, and 220 and thereby create an exception to Section 201. This exception mirrors the existing Wage Order exception for motion picture employees. Now, payment of wages to “print shoot employees”—defined as individuals hired for a limited duration to render services relating to or supporting a still-image shoot for use in print, digital, or internet media—may be lawfully made on the next regular payday after the employment ends. This legislative improvement enables print shoot productions to pay talent, stylists, photo assistants, and other crew through their regular payroll processes while avoiding waiting-time penalties.
SB 671 adds another reprieve for employers, allowing them to either (1) mail final wages to employees or (2) make them available to at a location specified by the employer in the county where the employee was hired or performed labor. Such payments are deemed to have been made on the date of mailing or being made available at the specified location.
Amid California’s inevitable AB 5 adjustment period, SB 671 thus provides a reason for the entertainment industry to continue doing business in the State. Both bills will affect industry hiring, and we are closely monitoring their progress through implementation. As new developments arise, we will keep you apprised. In the meantime, please do not hesitate to reach out to your favorite Seyfarth attorneys to discuss how to approach these changes as they relate to your business.