At first glance, it appears that legislators and regulators did not contemplate the unique needs of the entertainment industry as it relates to independent contractor and employer relationships. Unlike traditional brick-and-mortar businesses, reality TV, commercial productions and feature films are temporary projects that require a transient, freelance workforce. Under the current laws, the employment scenario that is the centerpiece of our industry triggers a series of complex regulatory requirements and liability issues with regard to worker classification, payroll, healthcare requirements and more.
Creative minds are best suited for creating, but these regulatory pressures can take the steam out of any hot new project. Federal citizenship forms such as the infamous I-9, state wage theft statutes, local taxes and municipality rules can make paying the many people who work on your project as difficult as navigating the Affordable Care Act.
Streamlining the sometimes maddening process of navigating these sometimes overlapping and murky policies, rules, requirements and laws is crucial for companies involved in the production of television, films and commercials. Failure to comply can lead to fines upwards of $10,000 depending on the incident at hand. Our approach is to tell clients to look at each temporary worker applicant as a potential lawsuit waiting to happen.
When hiring independent contractors and/or employees for commercial production, be aware of and avoid the following pitfalls:
· Employee Start Paperwork – The creative juices are flowing and you’re excited to get a new project going – but not so fast. The administrative burden of being an employer can be overwhelming. There’s a ton of paperwork to do before your temp staff can even get started on a production. The federal citizenship form, or I-9, must be filled out within three days of employment and done so properly. Even just two mistakes on the form can delay the start of a project – or worse, result in hefty fines of up to $10,000 per incident.
· Wage Theft Protection Notices – Another red flag to watch out for involves properly providing workers with wage theft protection notices. Hourly, non-exempt employees must receive a notice at the time of employment, one that clearly outlines work hours, workers compensation carrier, pay day, employer, rate of pay, etc. Each state may have its own particular nuances (with California being the most restrictive), but generally speaking that’s the required information. Failure to provide this notice at the time of hire, in most instances, could be another bump in the road toward moving forward with a project.
· State Specific Compliance – Compliance would be infinitely easier if there only were one set of rules, but when you layer in state, county and local municipal peculiarities, things get even trickier. For example, almost all states follow an at-will employment policy, meaning that the employer and employee have an agreement that can be terminated at any time, by either party and for almost any reason, with the exception of protected classes, including race, age, disability, etc. However, in the state of Montana, it is fundamentally different. Montana does not follow said policy and instead requires a documented reason for terminating an employee. The state protects employees from being terminated without good cause. Certain cities have complex compliance issues all their own. The best example is San Francisco which has the Healthy San Francisco Program, which is city-mandated health care provided by employers. If a person works within the city limits of San Francisco, their employer has to make a contribution to the city health fund in their name, even for freelance and transient workers. Not only do states and cities follow specific rules, even U.S. territories also have their own sets of regulations. For example, Puerto Rico does a lot of production, and yet people forget it is a U.S. territory and as such is governed by federal law, as well as some of its own unique regulatory nuances. In Puerto Rico, and recently in Connecticut, California and Massachusetts, workers are required to receive mandatory sick pay. Puerto Rico also mandates vacation pay, unlike the other 50 states.
· Proper Classification of the Employee – Before you’re even able to hire a new worker, it is very important to know what category they will fall under, before said reality show, film or commercial production begins. Are they a 1099 or W2? There is a 20-point check list to help, but even this may not provide a definitive answer. As an employer, you have to figure out which category a temp staffer will fall under. This can be crucial since the difference between an independent contractor and a W2 employee determines the eligibility of healthcare under the Affordable Care Act. A 1099/independent contractor would not be eligible for health care. The government, court system and legislature have taken a renewed emphasis on the proper classification of workers to insure that all those individuals are receiving the health care the recently revised law says they are entitled to.
· Additional Considerations, Proper Paychecks – Paychecks and supporting documents must meet regulatory requirements for transparency and yet can be tremendously complex when being processed. There are many components of a paycheck that need to be considered aside from the name of the payee and dollar amount. If a paycheck is not laid out in a specific format or does not have precise information, it can be red flagged by various departments of labors as a violation of wage and hour laws. For example, in California there are nine specific components to a paycheck. It is important to avoid wage and hour violations. Labor boards are generally employee friendly, particularly in states like California and New York.
Jon Lavallee is the chief financial officer at Talent Partners, a talent and production support services firm serving the commercial, film and television industries. Talent Partners, together with newly acquired PES Payroll, have been navigating the intricacies of production incentives for their clients for more than 10 years.
