Loan Outs in Limbo

The California EDD, the state agency that administers unemployment, has informed multiple entertainment payroll companies that cast and crew working on productions under the common “loan out” method have been misclassified. The EDD contends that many of those working under a loan out agreement should have been classified as employees, with productions paying them directly and withholding taxes from payment.

Loan outs are prevalent in the entertainment industry, with many department heads, actors, and other using them. Loan outs allow workers to own their own company, pay themselves through it, and “loan out” their services to productions. While this can benefit the productions, the primary purpose is allowing the worker to write-off their business expenses, including owned equipment, advertising, and agency fees.

The scope of the EDD’s objections are not yet clear, and the payroll houses, as well as the major guilds, are asking for clarification. It’s unclear whether the EDD is targeting specific instances of loan outs, or if this is the harbinger of a larger ruling. The Franchise Tax Board and other relevant agencies have not yet weighed in either.

This is a story that is likely to change quickly, but the Law Firm of Dillon McCarthy is monitoring the situation and what it will mean for clients.

What California's New Independent Contractor Law Means for Your Business, Even if You're Not Uber

Last month California Governor Gavin Newsom signed Assembly Bill 5 into law. Beginning next year, the world of California employment will look completely different. Parts of the law apply retroactively, changing the landscape now as well. While the law targeted gig economy companies like Uber and Lyft, it will have a profound effect across most California businesses. So what does the new law actually say and how will it affect your business?

Prior to this new law, businesses and the government had a lot more leeway to argue whether someone was an employee or an independent contractor. There were a number of factors, and courts had some discretion in weighing them against each other. The new law is much more strict. For someone to be considered an independent contractor, they must meet three requirements. If any of the three don’t apply to a worker, then that worker is an employee. The three factors are:

A. The company does not control the time, method, or manner of the worker’s job performance.
B. The worker performs work that is not part of the company’s usual business.
C. The worker performs work in this field for other companies.

If the worker and business fail any of these three criteria, California will consider the worker an employee. This will throw many businesses into chaos. The film industry, game development, and music production will be affected by the new rules. This is something that companies must address as soon as possible. Companies should be developing procedures to ensure that workers are appropriately covered, that contractors have the proper paperwork to protect the company and the contractor, and to check which of the numerous exemptions may apply to them.

Contact The Law Firm of Dillon McCarthy for assistance in navigating this complex new aspect of your company or production.