The Fine Print: Why Smaller Agencies Won’t Sign WGA’s New Code Of Conduct

Fine Print Contract

The main battle between the the WGA and the Association of Talent Agents, which represents the major talent agencies, has been over two thorny issues: packaging fees and agency-affiliated production companies.

The issues do not impact most of the 234 guild’s franchised agencies, however. An estimated 94%-95% of the TV packages are controlled by the “Big 4” talent agencies — CAA, WME, UTA and ICM Partners — which is why the WGA is only suing them over the practice. And only three agencies, CAA, WME and UTA, are involved in producing.

WGA ATASo why is that of the ATA’s 113 member-agencies, only one, Pantheon, has broken ranks and signed the WGA’s new Code of Conduct? What’s more, as far as I can tell from numerous conversations, no other ATA member agency or prominent non-ATA-affiliated ones, like Verve, seem intent to do so. (The WGA has gained ground among lesser-known non-ATA member agencies, expanding its list of signatories from 23 on March 15 to 61 currently).

“Why are the smaller agencies standing with the big ones?” one observer recently marveled. “ATA doesn’t really protect them as it used to; big agencies used to have a hands-off agreement with the smaller ones. Not anymore. Big agencies poach from small agencies all day long.”

Yet, mid- to smaller-sized agencies that have very limited (or no) packaging business and no production company ownership have opted to side with the ATA and not sign the WGA’s Code of Conduct. I surveyed a number of places to find out why.

There is a fundamental philosophical reason, which I heard again and again, even from agencies that don’t represent writers.

“Our loyalty and fiduciary duty is to our clients,” one agent said. Added another, “The WGA is trying to dictate to the agencies how they should do business. We are all equals and a team, we will not be dictated what to do.”

At the core of the problem is how the Code of Conduct came to be, with the WGA enforcing it after negotiations with the ATA fell through. It was not the result of the two sides coming to an agreement that both consider fair, and some smaller agencies argue the ATA had been more collaborative in the process than the WGA has been.

Beyond that, a number of midsize and smaller agencies I spoke with have no real issue with the clauses in the new code that ban production company affiliations, and privately side with the WGA on the issue. There is less support for packaging, especially among agencies that have lit operations. While their share of packaged projects is small (they usually co-package with one or more of the Big 4), it remains a lucrative revenue stream for them.

But there there are several other, lesser known provisions in the code that are giving agencies pause. We examine some of them below, sharing both the agencies’ concerns and the WGA’s interpretation in our quest to educate and try to represent all sides of this complex issue.

The most controversial clause, which for many agents has been a non-starter, is Section 7A:

This Code of Conduct shall remain in effect for a period of three years after initial implementation by the Guild. Thereafter, the Guild shall have the right to terminate or modify the terms of this Code of Conduct upon written notice to all subscribing Agents. The Guild’s termination or modification shall be effective 90 days after its service of such notice.

This provision, which was even more restrictive in the WGA’s March 27 Code of Conduct proposal  — with no three-year term and only a 60-day notice — has sent a chill across the agency community. Reps call it “unilateral governance,” hypothesizing that the clause would allow the WGA in three years to change any terms of the code any way it likes; for instance, it could reduce the size of the commission from 10% to 2%, all without a bargaining discussion.

Sources close to the guild note that the three years listed is a standard term and that all collective bargaining agreements are for three years. They dispute that the move is unilateral, pointing to the second clause in the section:

A subscribing Agent shall have the right to terminate its obligations under this Code of Conduct upon written notice to the Guild. The Agent’s termination shall be effective 90 days after its service of such notice.

While the provision allows individual agencies to terminate the code if they are unhappy with its terms, only the guild is allowed to make and enforce changes with short notice and no input from the other side. Sources at the WGA say that they “expect there would be negotiations” after the three-year term, but the uncertainty, with key cornerstones that govern their business at the mercy of the WGA, is making agents uneasy.

As for the size of the commission, sources at the WGA note that the guild had made reverting the agency business to one based solely on 10% commission a central piece of its campaign and there are no plans to change that. That is not spelled out in the Code of Conduct.

Two other aspects of the code related to sharing information with the guild are also troublesome for agents.

D1 Agent shall provide the Guild with a copy of the agreement or a summary of essential deal terms of any agreement engaging the Writer’s services or acquiring the Writer’s written material no later than 10 days after the earlier of (a) the existence of a binding contractual commitment; or (b) the commencement of Writer’s writing services.

Many agents I spoke with have a serious issue putting confidential deal terms they had negotiated for their clients “out into the ether” for competitive reasons as well as over privacy concerns for the clients. Sources close to the guild confirmed that even if a writer does not want her/his contract shared with the guild, their agent will be obligated to send a copy under the code. WGA sources insist this is part of being in a union, and that the provision is about contract enforcement, such as intervening when writers are not getting paid. Most such issues are limited to indie films.

Clauses C3 and F5, involving extensive document submissions, are very problematic for small-size agencies.

C3: Agent shall provide promptly and no less frequently than quarterly to Writer and to the Guild an itemized statement showing in standardized electronic format (a) all compensation received by or on behalf of Writer; (b) all commissions received by Agent related to its representation of Writer; and (c) all fees received by Agent that has provided feature film financing and sales services.

F5. Agent shall provide the Guild with an annual report summarizing Agent’s diversity efforts and reflecting, through anonymized data, the employment history of all Writers represented by the Agent, broken down by membership in statutorily- protected classes.

While the large agencies could absorb the additional paperwork required within their HR departments, owners of smaller agencies tell me they would have to hire a full-time employee dedicated entirely to collecting and submitting to the WGA a copy of every paycheck, every invoice, etc., putting an outsized financial burden on them.

Sources at the guild point to a clause that was added to the Miscellaneous section in the final version of the code after receiving feedback from smaller agencies.

In administering the disclosure requirements under subsections 3.C.3. and 3.F.5. above, the Guild will take into account the more limited staffing and recordkeeping capacities of smaller agencies.

The clause is vague. According to sources at the WGA, there would be no waivers for smaller shops, but they may be required to submit records less frequently.

Other clauses raising eyebrows include Dispute Resolution via Arbitration. The decision of the arbitrator is being stipulated in the code as “final and binding,” saying the arbitrator has to come from a pool selected by the WGA, which is included in the Code. Sources close to the guild noted that had the negotiations with the ATA not failed, the arbitrator selection could’ve been a mutual decision, and point out that the names on the list are respected experts, and many of them also serve as arbitrators for the WGA-AMPTP agreement.

There are also concerns about the broad and vague definitions used in the Conflict of Interest section that could be far-reaching.

The WGA legal team’s advice: When in doubt, report to the guild anything that could be perceived as a potential conflict of interest.

To sum it up, prominent mid- and smaller-sized talent agencies see too many pitfalls — both fundamental and practical — in the new WGA Code of Conduct to sign it. The guild says it modeled the code after Codes of Conduct for professional sports unions. Maybe the entertainment industry is too different to apply directly know-how from sports.

The WGA has said it is hoping that many “key agents,” including those employed at the Big 4, will bolt, even seeking members’ help in organizing agents “to make the move to independence.”

So far, there have been no agents from major agencies leaving to start smaller shops that would be willing to sign the new Code of Conduct, and the issues with the code could be part of that. But there has been chatter about agents potentially mulling such moves.

As one former lit agent put it, even if the code is not perfect, “there is an opportunity here.”

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