“Onerous” Contracts “Rampant”Biz

SAG-AFTRA, a group of music artists groups, and others have made public comments to Federal Trade Commission claiming that “onerous”These terms apply to both employment and contract terms “rampant”These are in the entertainment, recording, news and media industries. These “unconscionable”They say contracts are not just for lawyers. “harm fair competition and restrict workers from building their careers,”However, “disproportionately”Harm to underrepresented groups, especially those in the music industry.

“Entertainment and broadcast employers take advantage of workers every single day,” said Duncan Crabtree-Ireland, SAG-AFTRA’s national executive director. “It is time to put an end to one-sided contract terms that restrict job opportunities, earnings and worker mobility. We won’t stand for unfair treatment and we will always fight to ensure entertainment and broadcast workers get a fair shake. That’s why we are filing these comments and working to pass legislation like the Fair Act in California.”

According to the coalition’s FTC filing:

“Overly broad exclusivity clauses and unilateral options, exercisable in the employer’s sole discretion, allow employers to unreasonably restrain actors’ ability to work. These restrictive covenants have become more oppressive and make actors unable to work for long periods of time and prevent them from being on the market. They restrict actors’ abilities to work, compete, and build their careers. These pernicious provisions cannot be modified for anyone, except for a few of the most famous actors.

“Underrepresented groups will be disproportionately disadvantaged by this practice. Being held off the market – and therefore off-screen – for years, during the period when they would statistically have the most opportunities, will destroy earning potential and career building. It blocks opportunities and reduces exposure at the most critical stage of their careers.

“These restrictive covenants lack a pro-competitive justification in today’s market. There is no market harm if an actor works on another series, commercial, or movie during hiatus periods. There is market harm by unilaterally and unreasonably restricting work for actors, to the sole benefit of increasingly powerful, vertically integrated, global entertainment conglomerates.”

The comments, which were jointly filed with the Music Artists Coalition & Black Music Action Coalition, state:

“Unconscionably long contract terms are rampant in the industry, aided by an exemption to California’s Seven Year Rule, which keeps musicians and actors from accessing the Rule’s protections. California is known for its worker mobility and is considered one of the most important economic countries in the world. The Rule bars personal service contracts being enforced after seven years. Musicians are singled out – to the economy and the publics’ detriment – as this anti-competitive law and Major Label practices deflate the movement of labor and stifle creativity in the workforce.

“Musicians sign record contracts for a chance at success in music. For most musicians, however, record contracts are not a pathway to success. Instead, they serve as a means for Major Labels to exploit their labor. Major Labels claim that 1 in 10 artists will recoup their advances, sums that are paid to artists before a recording is released and that are fully recouped before artists receive any royalties. However, this claim is irrelevant because Major Labels don’t provide access to many artists.

“Musicians are routinely denied the chance to complete their contractual obligations and are thus severely or entirely restricted in the movement of their services and economic opportunities. Labels are one way artists get rejected. ‘shelve’An album without releasing the entire record. Another way is to release songs. ‘singles’Instead of on albums. Both contracts have a longer term because labels contract for a limited number of albums.

“Three multinational, foreign-owned, multibillion dollar companies (collectively, the ‘Major Labels’The US holds 65% of all global markets. Major Labels have launched huge IPOs. This has allowed them to ride skyrocketing margins and own huge shares in streaming companies. Major Label record deals continue to lure young artists from historically underserved communities, often people of color, into these predatory practices.

“The restrictive and anti-competitive practices of the recording industry belong in a bygone era. An exemption like that in California’s Seven Year Rule gives the labels safe harbor to mistreat musicians. Our international allies have taken notice: the U.K., the third-largest music market by revenue in the world, has engaged in an anti-competitive investigation into the practices of the recording industry. Restricting the free movement of labor and services, and clamping down on creativity generally, is antithetical to American ideals and norms. The record labels already have a leg up–they do not need or deserve to have the law and leaders look the other way in the face of unfair contracting.”

Willie “Prophet”Stiggers, cochair of the Black Music Action Coalition said: “Artists should not be the only people who are excluded from California’s protection against contracts longer than seven years. As the world, this country and this industry evolves, so should the laws that govern it. Most artist have never been respected or treated as partners, just products, which makes it easier to perpetuate this unjust practice. Artist aren’t looking for more, just the same protection as everyone else in the state.”

SAG-AFTRA’s comments on broadcast news are:

“[We have]For well over 25 years, I have been dealing with the issue of noncompete agreements in employment agreements. These clauses have been a part of many employment agreements in the broadcast and news industries for a long time. These agreements were once only available to highly-paid, well-known employees who had resigned from their jobs. But, they have become a common feature of employment agreements in the news and broadcast industry for over two decades. ‘standard boilerplate’/’non-negotiable’ for employees, regardless of pay, who appear in front of a camera, behind a microphone, work behind the scenes and are enforced even in cases of termination or lay-off.

“Employees in the news and broadcast industry are under a more traditional staff employment structure. Non-compete agreements are designed to limit or restrict employee mobility and worker entrepreneurship. They artificially restrict an individual’s ability to market his/her talents, services and skills in a free market resulting in wage and salary stagnation.

“We have seen the unfortunate impact of non-competes and restrictive covenants for decades. Many young people who start their careers in radio or TV have to turn down opportunities to make more money due to restrictive covenants. Others were forced to leave the field rather than move from their home city. Other people have been forced to pay thousands in liquidated damages by their employer to leave a job because of a restrictive covenant.

“It is often argued that many non-competes provisions, based on the applicable state law and individual circumstances, are not even enforceable. Employers include them in their employment contracts in the knowledge that they won’t have to enforce them in court. Employers can rest easy knowing that the restrictions will be enforced by the courts, despite the fact that the employees have to know the law and must hire an attorney.

“In response to the employers’ consistent use of these provisions in the broadcast industry, SAG-AFTRA has proposed limitations on these agreements through collective bargaining, however, employers continue to resist any limitations on these agreements. In fact, employers have only worked to strengthen the language of their non-compete agreements and add other restrictive covenants to employment agreements to avoid existing legislative restrictions on non-compete agreements. In non-union employment, the employee has no recourse against their being included.”

The union says that it’s “been successful in promoting legislation limiting their enforcement in the broadcast industry in several states, including Arizona, Connecticut, Illinois, Massachusetts, Maine, New York, Washington and the District of Columbia.”

According to SAG-AFTRA

“An issue in employment agreements for radio and television broadcast employees is the use by employers of personal service agreements that purport to be of a definite term inasmuch as they bind the employee for a number of years but also permit the employer to terminate the agreement at any time and with little or no notice to the employee. These contracts severely restrict employees’ mobility for long periods of time and free the employer of the usual allocations of risk inherent to a definite-term contract. They also effectively tie an employee to one employer for as long the employer decides the original bargain is in its favor, without any concomitant obligations for the employer.

“Under normal circumstances, when entering into a long term contractual employment relationship, both parties — the employer and the employee — incur duties and rights with respect to the other, and in so doing assume some measure of risk that they will not realize the benefit of their bargain over the defined period. The employee agrees to bind herself to the employer and to guarantee the employer a price for her services that she thinks, at the time of the contract’s formation, will be favorable to her over the period of the contract. The employer on the other hand, negotiates to secure those services for a fixed price for a long-term advantage. This dynamic is mutually beneficial because both sides take some risk that they won’t realize the benefits of their agreements over the time they have contracted.

“Contracts that bind employees to employers for a definite term, but allow the employer to maintain an essentially at-will relationship with the employee, distort this mutuality. No matter how her contract is going, the employee is still bound to her employer. Her employer has the right to terminate her employment if it finds that it is not in its best interests.

“This freedom to terminate the contract gives the employer immense power over the employee. The contract’s definite term locks the employee in place and prevents her from taking on other jobs within the same industry. However, the employer has no lasting obligation to the worker and can search the field for cheaper alternatives. The employee can also be substituted by the employer at her will.

“By exercising this power, the employer is able to put downward pressure on wages. Not only is the employer actually able to replace a higher-paid employee with a lower-paid one with little transaction cost, but the ease of making such a change can have the effect of making incumbent employees more willing to either forego increases or take lower wages themselves just to remain in the position they already occupy.”

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