California Entertainment Lending Company Bill Signed

California Governor Gavin Newsom signed into law a union-backed bill that aims to protect entertainment workers’ use of loan companies after an audit earlier this year sparked widespread concern about their future.

The governor’s office announced that Newsom officially gave the green light to Sen. Anthony Portantino’s SB 422 on Monday. The bill, which received support from the Entertainment Union Coalition, comprised of the IATSE Council of California, the Directors Guild of America, SAG-AFTRA, Teamsters Local 399 and LiUNA! Local 724 — codifies that a loan company is the employer of the entertainment workers who establish those businesses and work under their auspices and is responsible for paying the employers’ taxes.

The legislation also prohibits entertainment staffing companies from being considered employers of loan companies or their workers. Under the bill’s parameters, entertainment payroll companies will be required to submit quarterly reports to the California Employment Development Director, disclosing their payments to loan companies.

The legislation effectively upholds entertainment workers’ long-standing use of such S, C or LLC corporations, which “lend” their services to various other businesses, an industry union said. “In practice, this means that loan companies will continue to operate as they have for decades,” the Writers Guild of America West wrote in an Aug. 31 message to its members explaining the bill, which had then passed by the state legislature. . “The law also preserves an important court decision establishing the right of loanee employees to receive unemployment insurance benefits on the same basis as other unemployed workers. »

Many industry workers, such as writers and reality TV producers, use loan companies, which offer certain business protections and may offer tax benefits. DGA Western Executive Director Rebecca Rhine explained in an interview, whose union played a leading role in collaborating on the bill: “Lending has been a part of our industry for many, many decades in due to the transient nature of the work and multiple employers and employers. different projects. It is therefore a structure which helps people in the sector to manage their particular professional life.

Several stakeholders began working on the bill after news broke in May that the California Employment Development Department was auditing one of the industry’s major payroll providers, Cast & Crew. Cast & Crew sent a warning message to industry workers that month, noting that the State Department had challenged the practice of routing compensation through loan companies rather than paying wages directly to workers. owners or shareholders of loan companies as if they were employees of the payroll service providers. Cast & Crew said at the time that it was “actively contesting” the EDD’s decision and was working with unions and entertainment companies on the issue, which it said would quickly become “an issue to industry-wide.

In its response at the time, EDD said it was engaging with industry representatives and clarified that it would not ban the use of loans in California.

Entertainment unions began engaging with the governor’s office on the issue after the audit was announced and ultimately worked with Portantino to resolve the issue through legislation, Rhine said. WGA West, EDD and Cast & Crew also played a role in this effort, according to WGA West’s August message to members. Rhine added of the new law: “The most important thing is that it clarifies to our members, the state and the industry the role of lending companies in our world. »