Lights, Camera, Legal Action: Avoiding Employment Pitfalls in the Film and Studio Industry

In the wake of the deadly Rust tragedy last year, independent studios and production companies began revisiting their practices, policies, and attitudes regarding safety on set. While robust safety practices are paramount, studios and production companies that operate in “Y’allywood” (and elsewhere) should also reexamine their employment policies to ensure compliance with state and federal laws. Although high-profile accidents tend to garner the news cycle headlines, the failure to comply with regulatory and legal mandates occurs with far more frequency and is more likely to impact a production. Below, we highlight some of the most common employment law pitfalls for companies in the television and movie industry.

Correctly Classifying Workers: Employees vs. Independent Contractors

Studios and production companies often attempt to avoid significant liabilities (tax and otherwise) by classifying certain workers as independent contractors instead of employees. Indeed, much of the entertainment industry has been structured around using “gig” independent contractors rather than forming a traditional employer-employee relationship. Contrary to popular belief, simply referring to a worker as an independent contractor in a written agreement does not insulate a business from legal challenges. Moreover, workers are not properly classified independent contractors simply because their work is temporary or sporadic. Rather, the determination of whether an individual is properly classified as an independent contractor turns on several factors, including — for example — the amount of control the company exerts over the individual, whether the company provides the equipment used by the individual, and whether training is provided.

Studios and production companies should carefully assess each particular arrangement because improperly classifying workers as independent contractors can result in stiff penalties. With the rising public awareness regarding perceived exploitation of “gig” workers, recent federal and state enforcement efforts have resulted in a growing number of individual and class action lawsuits.

New Hire Reporting and Unemployment Insurance

In Georgia, newly hired and/or rehired employees must be reported within 10 days of their hire date, whether they are considered full-time, part-time, or temporary employees. Visit the Georgia New Hire Reporting Center website for more information regarding new hire reporting. Relatedly, studios and production companies in Georgia are required to pay unemployment taxes if they have a quarterly payroll of at least $1,500. More information regarding unemployment insurance in Georgia can be found at the Georgia Department of Labor website.

Exempt vs. Nonexempt Classification

The proper classification of employees as either exempt (i.e., salaried) or nonexempt (i.e., hourly) is critical given the legal ramifications associated with getting it wrong. Because of the prospect for treble damages and attorneys’ fees, misclassification in this context has become highly litigated, leading to a cottage-industry of lawyers who specialize in suing employers under the Fair Labor Standards Act (“FLSA”). Under the FLSA, employers must pay nonexempt employees at least the minimum wage and they must also receive overtime payments for hours worked in excess of 40 hours per week. Although exemptions apply (e.g., executive, professional, administrative, etc.), they are narrowly defined and often misused by employers in an attempt to avoid paying overtime premiums.

Background Checks

In an effort to promote a safe work environment, many employers utilize criminal background checks as part of the onboarding process. Although background checks are a fundamental part of a robust safety regime, they can expose employers to substantial legal and financial risks if not conducted properly. For starters, the Fair Credit Reporting Act (“FCRA”) imposes duties upon employers to, for example, communicate with candidates regarding their potential impact of their background report before denying employment. The FCRA also requires that employers obtain authorization to obtain a background check, and the authorization must be properly formatted. As with wage and hour lawsuits, claims under the FCRA have proliferated given the numerous pitfalls that present themselves in complying with the law. Not only do the mechanics of the FCRA present hurdles for employers when conducting background screening, but the decision to deny employment based on a criminal record must be weighed against guidance from the Equal Employment Opportunity Commission to avoid a claim for discrimination.

Workers’ Compensation

Studios and production companies that regularly employ three or more persons must provide workers’ compensation insurance. For more information regarding workers’ compensation in Georgia, please visit the State Board of Workers’ Compensation website.

Handbooks and Policies

One of the most fundamental (and often overlooked) aspects of the employer-employee relationship is the memorialization of company policies, most often in the form of an employee handbook. Handbooks — and the attendant employee acknowledgement forms — set clear expectations for employees and eliminate ambiguity when it comes to discipline. Companies without a handbook often find themselves making ad hoc decisions about what is acceptable (or unacceptable) in the workplace. For example, where smoking is permitted or how to report sexual harassment. This can come back to bite an employer who unwittingly treats two employees differently under similar circumstances, which can lead to a claim of discrimination. Employee handbooks are generally a straight-forward project, and AGG has templates from which studios and production companies can work.

Documenting Discipline

The most common mistake made by all employers when employees misbehave is the failure to document what happened. Too often, employers are prepared to terminate an employee, but when they turn to the personnel file, there is no evidence on hand that the employee has ever violated company policy. Be sure to have documentation for discipline, but also train managers to overcome the awkwardness of discipline and commit to administering it effectively.

Disability and Religious Accommodations

In recent years, both disability and religious accommodations have come to the forefront of the public consciousness in the context of mandatory COVID-19 vaccination policies. However, even before the advent of the pandemic, employers have always had the obligation to enter into a dialogue with employees who request accommodations. Managers should be trained to be attuned to employee requests, because there is no formal document or “magic words” that must be used by employees to request an accommodation.

As always, if you have any questions about employment law compliance or any other of the many rapid developments related to the coronavirus pandemic, please contact a member of AGG’s Entertainment & Sports or Employment Law teams.