Assembly Standing Committee on Insurance

Welcome to the Assembly Committee on Insurance. Today we're going to consider three bills. The following two bills are recommended consent file item number one, AB 1239 Calderon and file item number 28, AB 1505 Rodriguez. Let's establish a quorum. Committee Secretary, Please call the roll.

[Roll Call]

Okay. Do we have a motion and a second for the consent calendar?

Yes, second.

Thank you. Please call the roll.

Consent calendar is file item number one, AB 1239 Calderon. Motion is Senate amendments be concurred in. File item number two, AB 1505 Rodriguez, motion is Senate amendments to be concurred in. [Roll Call]

Okay, the first item is SB 422 by Senator Portantino. Whenever you're ready, Senator.

Thank you. Thank you, Madam Chair and Members, I'm very proud to be presenting SB 422 to the Committee. For over 100 years, the motion picture industry of California has been an economic engine for good, strong union jobs and many small businesses, as well as a generator of significant state and local tax revenue.

The project by project Nature of the industry means that cast crew directors and writers often work time, limited assignments for different employers over the course of a year to ensure workers have a steady paycheck and access to stable benefits. A unique employment structure evolved over the past century.

For decades, film and television studios have engaged some of these workers through personal service corporations, commonly known as loan out companies. Payments to those loan out employees are often processed through payroll companies rather than directly paid by the studios. Unfortunately, over the last four years, we've brought significant challenges to Hollywood and California's entertainment industry.

Exacerbated by the Covid-19 pandemic, many folks are still struggling within that industry as it gets back on its feet. Recent actions by the California EdD disregarded loan outs as a legitimate business entity and asserted that loan outs are employees of the payroll service company rather than the independent businesses.

This decision has the potential to disrupt the entire structure of the industry overnight, creating chaos and challenges for workers and their loan out companies.

AB 422 will ensure that a loan out structure remains accessible to the entertainment industry by codifying the definition of a loan out company and confirms that loan outs and the employees of loan outs are not employees of the payroll service company. The Bill is, I believe, going to get significant bipartisan support.

And as a little bit of history relative to loan out companies, it's not unique for the Legislature to be grappling with this issue or to help with an issue going back to 2008, when Speaker Nunez at the time authored universal.

Healthcare, there was a piece in the Bill that was going, that didn't understand loan out companies at the time. And so, working with the DGA and other folks in that industry, we had to explain to the speaker's office that the industry was fine paying one tax on the transaction, but not two.

And so the Legislature accommodated this unique business model that many in the entertainment industry happen. And at the time, one of the big questions they asked was, well, are these loan outcomes only for the wealthiest, only for the top talent? And the answer is no.

Many of the rank and file trades, people in the industry, frankly, the middle class in the industry, use these loan out agreements for their family's benefit because of the nature of multiple employers in the same year. So it's important to note we're not talking about rewarding the top stars who make hundreds of millions of dollars.

We're talking about the actual working cast and crew on these movies that create so much for the State of California.

And so with me, I have Missy Johnson from the DGA, and I think Greg Campbell, I don't know if he made it or not, are two expert witnesses and respectfully asked for an I vote when appropriate and appreciate the opportunity to present this important Bill.

Thank you. You may begin whenever you're ready.

Thank you. Madam Chair, Missy Johnson here in support of SB 422 on behalf of the Directors Guild and its 19,000 Members who are directors and Members of the directorial team.

DGA is a Member of the Entertainment Union Coalition, whose Members include the California AATSE Council, Teamsters Local 399, LIUNA Local 724, SAG AFTRA, all of them support this legislation.

For over a century, the motion picture industry has been an economic engine for thousands of good union jobs and small businesses, a major generator of state and local tax revenue, and a pillar of California tourism. It is also largely a freelance industry, one that is built around production by production nature of our business.

That means the directors and Members of the directorial team, as well as the cast and crew and writers, come together to make a particular production. Sorry. And then they disband, and then they go on work on another production, completely unrelated, with a whole different team of talent, cast, crew, technicians, et cetera.

While they go from job to job, the directors and other workers are protected by strong contracts in a largely unionized industry. The transitory and episodic nature of the industry has led many of our Members and Members of other unions and guilds to operate through legal business entities known as loan out companies to manage their careers.

As Senator Portantino adequately described, the word loan out is generated from the concept that the owner employee of that company lends the services of its employees and in many cases, the highly specialized equipment needed to fulfill the specified service. Like directing, the majority of loan out companies are made up of a single worker owner.

In practical terms, when an individual creates a loan out, they most often become its owner and both its sole employee. They are codified in the DGA's collective bargaining agreements just as they are in the other agreements for unions and guilds.

And that ensures that our Members who have loan outs are entitled to and receive all of the same protections of our collective bargaining agreements, such as minimum compensation, health insurance, and pensions, the same things that someone would receive as a direct w two employee. This is very important here.

The choice to utilize a loan out is completely up to the employee. It's not a decision that anybody but that individual makes. An existing law has long recognized the motion picture industry relationship for production workers. This Bill will codify that practice regarding loan out companies and establishes a new reporting requirement. Sorry.

Establishes new reporting requirements to simplify Edd compliance Administration as many of you know, the motion picture industry is facing several challenges related to dislocation, global competition, and the rise of artificial intelligence. This Bill clarifies the existence of loan outs and provides the EDD with necessary information for appropriate oversight.

It's for that reason that the DGA and the Members of the EUC strongly support this bill and respectfully request your aye vote.

Madam Chair Members. Greg Campbell, on behalf of cast and crew, reading the room and the motion, I don't have much more to add other than we appreciate the author staff. It's been a lot of work to make sure that we get this right.

We want to clarify what the intent of this is and make sure that the functioning practices of an industry that have been going on for 75 years are continuing to happen and not cause any disruption to lead to loss of production or anything in California. With that, we respectfully ask for your I vote.

Thank you. Is there any additional support in the room, ladies?

Shane Gusman on behalf of the Teamsters and SAG AFTRA in support.

Thank you, Madam Chair Members. Megan Subers on behalf of the Writers. Guild of America west in support.

Madam Chair Members of the Committee, Yvonne Fernandez with the California Labor Federation and The California AATC Council in support.

Thank you. Is there any opposition in the room? Seeing none. I'll bring it back to the Committee. Do we have any questions for Members? Someone would.

Just a comment. First of all, thank you for bringing the bill. I had no idea about this structure at all. It's fascinating that it exists. I guess my first concern would be obviously for the workers, but the way you've laid it out is obviously for the protection of the workers. So you learn something new every day.

Thank you so much, Mister Portantino. I'll be supporting the bill.

Great. Okay. Senator, would you like to close?

Yeah. And just for the record, cast and crew is one of the payroll companies. And so you have labor, you have the payroll companies, you have the production companies, you have total consensus on the model and why it needs the clarification. And so appreciate the opportunity to present for you and respectfully ask for an aye vote.

Thank you, Senator. Secretary, please call the roll.

File. Item number three, SB 422. Motion is do pass[Roll Call]

Would I.

Thank you, Senator. That gets out, we're going to let Members add on right now to the consent calendar.

[Roll Call]

Appreciate. Thank you. Appreciate. Everything.

Okay, we're going to leave the roll open for five minutes. Secretary, open the roll consent calendar.

[Roll Call]

This concludes the Assembly Insurance Committee.