It Will Soon Be Illegal For Studios To Verify Salary Quotes: Hollywood Dealmakers Brace For California Labor Code 432.3

Scales Of Justice Gavel

EXCLUSIVE: As if the current landscape of dealmaking in film and television hasn’t grown complicated enough, California Labor Code 432.3 adds a new set of complexity that both studios and agencies are grappling with at the moment. When studios negotiate salaries for talent with agents, they ask for recent quotes, and verify them by calling business affairs execs at the last place that hired the talent. As of January 1, executives who do that will be breaking the law, and the penalties are severe.

The code was approved by California Governor Jerry Brown in October, and it had nothing to do with Hollywood. It was enacted to help remedy the gender pay gap. But it will complicate the Hollywood deal making process. Next year, studios will no longer be allowed to ask talent reps for quotes on what their clients made, or get it from any outside source. Agents are no longer allowed to tell studios what their client has made, unless they have received written consent from that client. In that case, agents can volunteer the information, but studio execs putting together projects are prohibited from asking for it or using other methods to verify.

A similar statute was enacted in New York on October 31, and the potential penalty there is a $250,000 fine. In California, violators leave themselves open to lawsuits for damages, and class action lawsuits. I spoke to several sources on both sides of the table. A few thought that this would merely create another step in the negotiation procedure, and that agencies will press clients to sign waivers that will allow their salaries to be divulged. Others felt it is more complicated.

An exec said that agents are known to sometimes exaggerate when disclosing past quotes, and the fastest route to the truth was to call rivals in business affairs that most recently hired the actor, writer or director. It was a quiet, reciprocal process that kept everyone honest. If, say, an agent discloses that a writer client got paid a certain amount, and it turns out the fee was paid for a page one rewrite as opposed to the quick rewrite deal on the table, the studio executive can inject reality into the negotiation. What will studios do if they are flying blind, like if a client doesn’t give their reps permission to disclose what they get paid?

“We’ll offer them scale, and increase it if they find some way of verifying what their clients made,” said one executive. Another said a move might be to get agencies to sign documents attesting that quotes are true, with the option to sue the agency later if it is discovered the quote was exaggerated or inaccurate.

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