October 17, 2024
On September 30, Governor Gavin Newsom signed SB 422 — a new law that protects the use of loan-out companies by entertainment workers in California, ensuring their continued function in the industry. The bill was introduced by State Senator Anthony Portantino and was supported by the work of the DGA in coalition with our partners in the Entertainment Union Coalition and the California State Federation of Labor.
Loan-out companies are a longtime part of the entertainment industry and are vital to many in the business. While confusing, the name ‘loan out’ perfectly describes how they operate: these companies are used often by film industry professionals including Directors and directorial team members so that they can “loan” their services to studios, streamers, and production companies. The practice is beneficial in an industry where Directors and their teams provide services to multiple employers on multiple projects. It is a business structure that is specifically referenced in our agreements and does not in any way diminish the economic and creative rights all members are entitled to.
SB 422 is important because it provides much needed clarity for members, employers and the state after concerns were raised in May of this year when California’s Employment Development Department (EDD) began auditing the major industry payroll company Cast & Crew over whether employees of loan-outs had properly made contributions to and therefore were eligible for unemployment benefits. The EDD audit of Cast & Crew created industry-wide anxiety about how any changes to the system would impact the benefits and payroll processes for thousands of workers who rely on loan-outs.
“The DGA was focused on this issue because we knew the importance of bringing much-needed clarity to our members, the industry and the State of California,” said DGA Associate National Executive Director/Western Executive Director Rebecca Rhine, who helped lead the effort. “This is an important employment tool that many of our members rely on, and it needed to be preserved. We also wanted to ensure legally required contributions are made into the state’s unemployment system that so many in our industry rely upon when they are not working. DGA members should know that their union was there during this critical moment.”
SB 422 clarifies that payroll companies are not the employers of loan-out workers but they are obligated to submit quarterly reports to the state detailing payments made to loan-outs. By clarifying these employment relationships, the bill reaffirms long-standing practices that underpin the unique nature of employment for so many in the entertainment industry. The DGA understands the importance of these companies to so many Directors and members of the directorial team. This law ultimately protects the rights of entertainment workers and stabilizes a crucial structure within the industry’s financial ecosystem.
For more information about loan-out companies,
please contact your manager or tax professional.