SACRAMENTO—A California bill that recently passed the Senate by a wide margin and has been referred to the state Assembly's Committee on the Judiciary would mandate huge fines for any employer who "willfully misclassifies" an individual as an "independent contractor" rather than an "employee"—and according to a former lobbyist for the Free Speech Coalition, that could mean big trouble for both strip clubs and adult movie/content production.
At issue is Senate Bill (SB) 459 which, as currently amended, would "prohibit willful misclassification ... of individuals as independent contractors," and "authorize the Labor and Workforce Development Agency to assess specified civil penalties from persons or employers violating the bill."
But according to lobbyist Matt Gray of the Capital Alliance Strategic Advocacy and Public Relations Firm, the bill "adds insult to injury" because "California law never clearly defines what is or is not an employee."
"Instead, California law relies upon a laundry list of employment circumstances, case law, and workplace conditions for each business to then decide for itself whether or not the worker is an employee or contractor," Gray wrote on the Capital Alliance blog. "Does the worker wear a uniform? When they handle money, do they keep it or does it go to the business? Does the worker control his or her own schedule? Is a 1099 issued? The totality of considerations goes on and on, and even state agencies will even disagree with one another on what set of circumstances results in classification as either an employee or contractor."
Adult nightclubs which feature stages upon which dancers strip and accept tips from patrons have been engaged in the "employee vs. contractor" dispute for decades, and decisions on the controversy all over the country have come down on both sides of the issue. But the problem will become central for adult movie producers in the near future, if the California Division of Occupational Safety and Health (CalOSHA) succeeds in expanding the California Health Code to define those involved in making movies (or other content) as "employees" rather than accept many performers' classification of themselves as "independent contractors."
According to SB 459, "willful misclassification" could subject "employers" to civil penalties of not less than $5,000 and not more than $15,000 for each violation, while if various state agencies or the courts find that the "employer" has engaged in or is engaging in a pattern or practice of misclassifying personnel, the penalty goes up to not less than $10,000 and not more than $25,000 for each violation.
"Then, to make matters worse, it [SB 459] set the lowest possible threshold for triggering a violation by relying merely upon 'willful' misclassification by the employer," Gray wrote. "To most people the term 'willful' means an act done of one’s own free will, intentional and voluntarily. As it applies to the law, it simply translates to someone improperly filling out a form—not that they intended to fill out the form improperly, but that they filled out the form and it was done improperly. In other words, guilty intent is not a requirement of a willful act."
So for instance, if SB 459 passes, an adult movie company which shoots a movie using no contract players but as many as 10 freelance performers (five sex scenes with two performers each) could easily find itself liable for $50,000 in civil penalties for paying the performers as independent contractors if CalOSHA decides that they are "employees"—and if the company did that for possibly as few as two movies, the penalties could easily ramp up to $250,000 per movie.
"To make matters worse, SB 459 made no allowance for affirmative defense against a misclassification, such as relying upon the advice of legal counsel, complying with case law, or adhering to industry-wide standards and historical practice," Gray noted. "That would mean 100% of all businesses with any misclassification would then be guilty and have to pay about $15,000 per offense! No exception."
So far, SB 459 has successfully passed both the Senate Committee on Appropriations and Committee on the Judiciary, been approved by the Senate in a floor vote, passed the Assembly Committee on Appropriations and is now under consideration by that body's Judiciary Committee. Gray's group has lobbied hard to replace "willful misclassification" with "voluntary and knowing effort to misclassify an employee" or "willful misconduct which is done consciously and intentionally in disregard of the law," but it's unclear whether those replacement definitions will make it into the final bill, or whether those changes would make the situation less dire for adult producers.
