BILL ANALYSIS �
Senate Committee on Labor and Industrial Relations
Ted W. Lieu, Chair
Date of Hearing: June 8, 2011 2011-2012 Regular
Session
Consultant: Gideon L. Baum Fiscal:Yes
Urgency: No
Bill No: AB 55
Author: Gatto
Version: As Introduced December 6, 2010
SUBJECT
Unemployment compensation: employer: motion picture industry.
KEY ISSUE
Should the Legislature remove the sunset on existing law which
allows a motion picture payroll services company to remit
unemployment insurance taxes as the employer of record?
PURPOSE
To make permanent existing law creating an unusual employer-unit
structure for the motion picture and theatrical industries that
ensures prompt remittance of unemployment insurance taxes.
ANALYSIS
Existing law requires each employing unit that meets the
requirements of a motion picture payroll services company and
pays the wages of a motion picture production worker to file a
statement with the Employment Development Department (EDD) that
declares its intent to be the "employer" of these workers.
Existing law defines "employer" as any employing unit that is a
motion picture payroll services company that pays and controls
the payment of wages of a motion picture production worker for
services either to a motion picture production company or to an
allied motion picture services company.
Existing law defines "motion picture payroll services company"
as any employing unit that directly or through its affiliated
entities meets all of the following criteria:
i. Contractually provides the services of motion picture
production workers to a motion picture production company
or to an allied motion picture services company;
ii. Is a signatory to a collective bargaining agreement for
one or more of its clients;
iii. Controls the payment of wages to the motion picture
production workers and pays those wages from its own
account or accounts;
iv. Is contractually obligated to pay wages to the motion
picture production workers without regard to payment or
reimbursement by the motion picture production company or
allied motion picture services company; and
v. At least 80 percent of the wages paid by the motion
picture payroll services company each calendar year are
paid to workers associated between contracts with motion
picture production companies and motion picture payroll
services companies.
Existing law establishes EDD as the payroll tax collection
agency and the state agency that administers the UI Program and
the SDI Program. The UI Program makes available benefits to
eligible people unemployed through no fault of their own, and
the SDI Program makes available benefits to eligible people who
lose work as a result of non-occupational injury or illness.
The above discussed employment-unit provisions are sent to
sunset on January 1, 2012.
This bill would remove the sunset on the above-discussed
provisions, making this employment-unit structure a permanent
statute.
Hearing Date: June 8, 2012 AB 55
Consultant: Gideon L. Baum Page 2
Senate Committee on Labor and Industrial Relations
COMMENTS
1. Need for this bill?
This unique employment unit relationship was first created in
2006 by SB 1428 (Scott), Statutes of 2006, Chapter 811, which
was designed to align state tax law with federal tax law, as
well as address the unique aspects of the film and theatrical
industries and the challenges the Employment Development
Department (EDD) had in collecting unemployment insurance
taxes for those industries.
Within the movie and theatrical industries, large staffs work
for a production company to produce often a single film or
play, and the company is dissolved at the conclusion of the
project. A professional within the movie industry typically
works for any number of production companies and may work for
several companies in the course of a single year. To simplify
accounting, payroll and taxes, production companies frequently
contract with statutory payroll companies to provide
compensation and tax payments. This also ensures that
production company employees do not have excess funds deducted
from their checks due to disability insurance taxes. The
payroll companies often serve a large number of production
companies and their payroll services may total tens of
millions of dollars.
Due to this unusual employment arrangement, special employment
unit definitions and practices are required in order for EDD
to receive unemployment insurance tax funds and employees to
receive a unified W-2 form for the payment of taxes. The
sunset for this employment arrangement was extended in by SB
1173 (Scott), Chapter 391, Statutes of 2008, to January 1,
2012.
Since that time, EDD has not seen any evidence of the motion
picture payroll services employer-unit arrangement having a
negative impact on the unemployment insurance fund, nor is
there any evidence to suggest that the removal of the sunset
would have an adverse impact on the unemployment insurance
fund.
Hearing Date: June 8, 2012 AB 55
Consultant: Gideon L. Baum Page 3
Senate Committee on Labor and Industrial Relations
2. Proponent Arguments :
According to Entertainment Partners, the source of this bill,
AB 55 would continue the option for motion picture payroll
services companies to be the statutory employer of the many
production workers involved with the making of movies,
television shows, music videos and commercials in California.
That model has proven beneficial to the unions and guilds and
the workers they represent, the entertainment industry, and to
the state. Entertainment Partners also states that the
stability that would be created by this bill would ensure that
the more than 150,000 motion picture production workers which
they served during 2010 would continue to work in a vibrant
and expanding California production environment.
3. Prior Legislation :
SB 1428 (Scott), Statutes of 2006, Chapter 811, created the
motion picture payroll services employment-unit tax remittance
structure.
SB 1173 (Scott), Chapter 391, Statutes of 2008, was discussed
above.
SUPPORT
Entertainment Partners (Sponsor)
Motion Picture Association of America
Screen Actors Guild
OPPOSITION
None on file.
Hearing Date: June 8, 2012 AB 55
Consultant: Gideon L. Baum Page 4
Senate Committee on Labor and Industrial Relations
Hearing Date: June 8, 2012 AB 55
Consultant: Gideon L. Baum Page 5
Senate Committee on Labor and Industrial Relations