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.

Scarlett Johansson's Lawsuit Against Disney Highlights the Importance of Precise Contract Drafting

2020 was a strange time for many industries, the film industry included. The big studios began experimenting to try and salvage their revenue in a year of movie theater closures. One of the big changes tried by giants like Warner Bros. and Disney was releasing films simultaneously to theater and on demand streaming. "Black Widow” was one of the victims of this strategy. Disney released it to theaters and on their streaming service Disney+ on July 9, 2021.

Traditionally, big stars receive a portion of the box office when they agree to star in a blockbuster, and Scarlett Johansson’s in “Black Widow” was no exception. But the box office receipts only apply to theatrical showings, not to viewings at home. This has resulted in an explosive lawsuit on her part against Disney, accusing them of violating her contract with them by not releasing the film exclusively theatrically for a period of time.

These claims will play out either in court or, most likely, in a settlement agreement. But they reveal how non-specific language in entertainment contracts can lead to disputes. The complaint alleges that the contract stated the film would receive a theatrical release. It did, and I’m sure Disney would rather you see it that way. But Johansson’s legal team argued that as a “term of art”, a generally understood phrase that everyone in the film industry would read the same, “theatrical release” should be understood as an “exclusive theatrical release.” She further cites to e-mails between her and Disney lawyers clarifying this position.

How might prevail here is a complex issue. But that’s the point. A lawsuit like this will need to address concepts like terms of art, good faith and dealing, and a host of other difficult legal subjects. These are the pitfalls of writing a contract assuming the sides are in agreement, rather than ensuring the contract is very clear and all important points. This would have never gotten this far were the contract to state either position clearly: either the theatrical run isn’t exclusive or it is, stated explicitly on the page.

This is why it’s important to carefully consider every provision of an entertainment contract, making sure that it unambiguously states what those signing think it does. As streaming changes the landscape, stating how it should be handled will become more important than ever. This is why it’s important to have a considerate lawyer on your side during contract negotiation. The Law Firm of Dillon McCarthy aims to ensure that everyone can be represented when negotiating entertainment contracts.

Los Angeles Resumes Film Production: What to Know for Your Set

Los Angeles is allowing film production to begin again. But coronavirus still threatens the health of the cast, crew, and other workers interacting with the set. The new rules for mitigating these risks are strict, and productions risk their future by ignoring them.

Most productions will not begin filming for some time, but these rules are not going away. In line with the governor’s orders, all members of the cast and crew must wear masks. While in front of the camera, if masks are not practical, actors are encouraged to remain at least 8 feet apart. The production itself must provide personal protective equipment and sanitation supplies for the crew to use.

A number of practices are being turned on their heads. Actors are asked to apply their own makeup. Traditional craft services buffets are banned. Everyone entering the set must be checked for signs of coronavirus before entering. Regular testing for the disease is required.

The County’s orders for film production are long and detailed, covering everything from who can be on set, what can be done there, and what procedures must be followed regarding testing and follow-up in the case of infection. Any production looking to resume filming should consult legal counsel for advice regarding the County’s Order on Reopening Protocol for Music, Television and Film Production before doing so. The Law Firm of Dillon McCarthy can help your production navigate these rules as you re-open while trying to keep your crew safe.