May 16, 2019 LOS ANGELES DAILY JOURNAL

Is The Labor Commissioner’s

Enforcement Of The Talent
Agencies Act Defensible?
Part I
On its face, the Writers Guild of America’s war with the Association of Talent Agents
wanting to eliminate packaging and agencies having equity in production entities is a
classic two-party dispute. But the WGA’s real target is the current interpretation and
enforcement of California’s Talent Agencies Act (Labor Code Sections 1700 et seq.),
which has allowed the agencies to engage in those two practices. The problem is in part
that the TAA is outdated and, in large part, the vagueness of the licensing scheme.
Did the California Legislature mean to give talent agencies a monopoly on procurement
activities, which led to the marketplace abnormalities of employment counselors also
becoming their clients’ employers and talent agencies making more money on projects
than then those the agencies have a fiduciary responsibility to represent? There is
neither legislative history showing the TAA was created to limit an artist’s choice of who
they want to represent them, nor any legislative history showing that rationale has ever
changed.
The antecedent to the legislation now known as the TAA was created in 1913 to curtail
abuses by those holding themselves out as talent agents. In particular, it was to stop
owners of burlesque halls and bordellos luring ingenues to become their employees by
masquerading as talent agents and telling the young actresses that those were the jobs
that were available.
Soon after, the Legislature empowered the labor commissioner to administer and
enforce the provisions of the licensing scheme. Yet, in the 1950s, the commissioner
turned a blind eye when then-president of the Screen Actors Guild, Ronald Reagan, gave
MCA — the top talent of the time — a waiver allowing the talent agency to also become
a production entity. The labor commissioner also stood silent in the 90s, when television
studios made eight-figure deals with personal management companies who then
became their clients’ employers.
Over the last decade, the commissioner has made no public sign of protest as WME —
the successor company created by the merger of the William Morris and Endeavor Talent
Agencies — first acquired International Management Group and then led a group that
paid $4 billion to own the Ultimate Fighting Championship, meaning the agency
represents sports figures while owning the events where their clients perform. WME
now also has a film production entity, Endeavor Content; and likewise, Creative Artists
Agency and United Talent Agency have film production and financing arms.
While barring employment counselors from also being employers was the very reason
for the codifying the TAA, one of the major precepts of the act is to ensure employment
counselors prioritize the interests of their clients over the studios and networks to whom
they sell. That mindset is best stated in Manera v. Stamelman, TAC-96, where the
commissioner found that a deal memo giving the representative “a 2% profit
participation” from the employer, Sony, violated Labor Code Section 1700.39: “No talent
agency shall divide fees with an employer, an agent or other employee of an employer.”
“Acquiescence of this practice would encourage agents to negotiate monies benefitting
the agent over and above the commission percentage … and would effectively supersede
the amount of compensation approved by the Labor Commissioner and render
regulatory control over compensation meaningless.” Id.
“Packaging” is where, for the perceived value of attaching artists they represent to a
project, a talent agency is not compensated by the employer with 3-5 percent of the
project’s total budget and back end profits. It is impossible to reconcile how the Manera
determination, barring agents from receiving profit fees directly from the employer, can
co-exist with “lawful packaging.”
Illogically, it does. In a May 19, 1964, opinion letter to the WGA’s executive director, the
labor commissioner explained that packaging was acceptable because Labor Code
Section 1700.39 “does not lend itself to a construction [prohibiting agents] from
obtaining a fee from the employer,” but rather it “prohibits[] the talent agent from
sharing his fee” with others.
Either packaging is lawful for all or it is unlawful for all. Profit participation cannot be
acceptable when part of a package from a major talent agency but otherwise a violation.
A 1998 opinion letter used tortured logic to separate packaging from procuring because,
according to the commissioner, the sale of a package predates any employment. See
“WGA’s nuclear option and the Talent Agencies Act,” Daily Journal (April 11, 2019). Only
after the idea is sold and the artist begins work does the labor commission have
jurisdiction. Except in Strouse v. Corner of the Sky, Inc., TAC 13-00, the commissioner
found the sale of a finished script was an attempt to procure employment due of the
expectation of future employment; to not take jurisdiction and allow “that activity to be
[outside] regulation … would create a standard that would be both arbitrary and
unenforceable.”
The arbitrary nature of TAA enforcement, particularly around the procurement issue,
has long been the subject of controversy. As noted in Marathon Entertainment v. Rosa
Blasi, 42 Cal. 4th 974, 988 (2008): “The Act contains no definition, and the Labor
Commissioner has struggled over time to better delineate which actions involve mere
general assistance to an artist’s career and which stray across the line to illicit
procurement.”
That “line” is impossible to discern. For instance, it is universally accepted that
unlicensed personal managers can lawfully deliver their clients to a talent agent, then
choose the 8x10 inch, edit the videos and create the resumes that agents pitch to
buyers. Hiring the sales team and creating the sales materials is inarguably part of the
procurement process; how is that then inside the legal line?
Recently, in reply to a suit brought by the National Conference of Personal Managers
challenging the TAA’s constitutionality, the labor commissioner wrote that it was also
inside the legal line to, “send [] out resumes, photographs, videotapes, or written
materials for an artist.” Does the line get crossed if a buyer receives the legal submission
and contacts the unlicensed representative? Is it legal if the buyer responds with a non-
negotiable offer? Is it legal for a non-licensed representative to receive any non-
negotiable offer? Recently, when faced with a similar set of unanswered questions, the
9th U.S. Circuit Court of Appeals invalidated a municipal ordinance, concluding the
ordinance had failed “to draw a clear line between innocent and criminal conduct. … A
‘statute cannot require the public to speculate as to its meaning while risking [] property
in the process.’ See Lanzetta v. New Jersey, 306 U.S. 451, 453 (1939).” Desertrain v. City
of Los Angeles, 754 F 3d 1147, 1155 (2014).
For a law to pass constitutional scrutiny, there must be clarity as to what activities are
regulated and what the consequence is for anyone found to have wrongly engaged in
the regulated activity. The labor commissioner has admitted the vagueness of what is
and is not lawful is problematic. Quoting State Labor Commissioner C. Robert Simpson
Jr., “There is an inherent inequity — and some question of constitutional due process”
because the term “procure procurement” “is so unclear and ambiguous as to leave
reasonable persons in doubt about the meaning of the language or whether a violation
has occurred.” The 1986 Report of the CA. Entertainment Commission, Pg. 25.
The labor commissioner’s interpretation that the TAA bars unlicensed procurement,
which dates back to at least 1953 and which adjudicators have subsequently followed, is
not aligned with the licensing scheme’s plain language. While most licensing schemes
reserve activities to licensees, there are a few — for instance the geologists,
psychologists, landscape architects, nurses and accountancy acts — that simply reserve
the occupational titles for those who have licensing status. Unlike other licensing
schemes, which expressly bar non-licensees from engaging in specific activities, the
geologists and like statutes have code sections that define the activities the
practitioners of those occupations engage in, but have no laws prohibiting non-licensees
from engaging in the defined activities. And no one risks consequences by using
psychological principles to affect another’s behavior, keep a businesses’ books, or
maintain or beautify an outdoor area without wrongly claiming the reserved title. As the
TAA is written that way, it should be enforced that way.
Rick Siegel is a personal manager who is often engaged as an expert witness on the
history, construction and application of the Talent Agencies Act.