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Changes to California Labor Code may impact hiring and casting decisions in the entertainment industry

Upcoming changes to labor laws in California may significantly affect the process of engaging talent in the entertainment industry. Studios, agents and other representatives should be aware of the challenges and obligations presented by these new laws so that they do not find themselves in violation of them.

Signed into law by Gov. Jerry Brown in October this year, AB 168 applies to employers of any size and becomes effective January 1, 2018. Under the new California Labor Code section 432.3, California employers can no longer ask job applicants for prior salary history information, including compensation and benefits. The law also requires an employer, “upon reasonable request,” to provide the applicant with a pay scale for the position.

If an applicant “voluntarily and without prompting” discloses salary information, the employer can consider and rely on the information in setting the applicant’s salary. Additionally, any salary history information that is publicly available (pursuant to federal or state law), can be considered by the employer.

The new law’s purpose is to narrow the gender wage gap. Supporters believe that setting pay rates based on prior salaries, which may have been discriminatory, perpetuates inequities in pay.

How might this affect how business is done in Hollywood? Frequently, when a project is put into development, the studio’s business affairs department will request quotes from the talent’s agent or other representative. They will then seek to confirm the quotes by calling the prior employers/studios for verification.

Under the new law, it appears that the business affairs executive can no longer “personally or through an agent, seek salary history information.” However, if the agent voluntarily discloses salary history information to a prospective employer without being asked, the studio may consider or rely upon that information in determining how much to pay the talent.

Obviously, if the talent has a terrific quote, his or her representatives will immediately volunteer the information. But for emerging or underpaid talent, the representatives need not volunteer and the studio may not request such quotes.

Historically, the studios do not, as a matter of official policy, contact other studios to find out prior compensation paid to prospective talent for fear of antitrust claims. If the talent’s agent does not voluntarily disclose the prior salary quote, the studio has no lawful means of ascertaining whether the talent would (or should) accept less than the budgeted amount for such services.

In addition, under the new statute it appears that the studio must, if requested, tell the talent how much money is budgeted for the role or service to be provided on a project when making the deal.

Therefore, the new law will likely impact the studio’s ability to engage talent for less than the budgeted amount. The new law may serve as a boon to new or underpaid talent—but present a challenge to studios trying to develop a project.

It’s difficult to predict, but the studios may try to create a workaround by implementing new budgeting criteria for each role, using a “basic” category and an “overage” category, with business affairs offering information only on the “basic” category. It remains to be seen, of course, as to whether that practice would survive judicial scrutiny.

This Update is provided to our clients, business associates and friends for informational purposes only. The Update included only brief descriptions of the laws at issue. Legal advice should be based on your specific situation and provided by a qualified attorney.

David Stern has over 30 years of experience in litigation and transactional law for media and entertainment companies involved in film, television, stage and new media. With over 20 years of experience as a General Counsel or legal and business affairs executive at companies such as News Corp., Viacom, New Wave Entertainment and Broadway Across America, he has a keen understanding of the needs of in-house counsel and, conversely, how outside counsel can best assist a client.