Actors may work with both talent agents and personal managers, but primarily pay commissions only to agents for jobs that the actors land. In California, talent agents have been celebrating a recent state appellate court decision that voids a personal manager's right to collect a commission on a job he procured for a performer.
"For almost a decade, the California Labor Commission and the California Courts of Appeal have relayed one consistent message to entertainment industry managers: Don't procure employment on behalf of your clients, because if you do, you're liable to lose your commissions," attorney Jonathan E. Stern tells the Association of Talent Agents in an article posted earlier this month on the ATA's website. "Just in case managers needed reminding, the Court of Appeal provided it in Yoo v. Robi."
In that mid-February case, California's Second Appellate District decided that manager Howard Wolf could not recover a commission under his personal-management contract with Paul Robi, an original member of the singing group the Platters.
"Yoo holds that the unlicensed procurement of employment on behalf of celebrity clients—no matter how infrequent or minimal—violates the [California] Talent Agencies Act," Stern explains to the agents. "Furthermore, the violation results in the loss of commissions earned under a contract."
California's Talent Agencies Act came into being in 1959, but it is actually an outgrowth of the state's Private Employment Agencies Law of 1913. So some form of protection from unlicensed representation has existed out west for nearly a century.
The State of New York
But what about New York, where, as in California, talent agents are licensed but personal managers are not? Last week Back Stage asked Stern, an associate in the entertainment litigation department of the Los Angeles law firm Alschuler Grossman Stein & Kahan, to explain how actors are protected here. After some research, he discoursed on the subject in an e-mail.
Stern explained that Sections 170 through 190 of New York's General Business Law regulate "employment agencies," with "theatrical employment agency" as a subset of that group.
"The New York statute shares many similarities with California's Talent Agencies Act," Stern explained. "In both states a talent agent must be licensed by the commissioner of labor (for agents located in New York City, by the commissioner of consumer affairs). Likewise, an investigation into the applicant's character is conducted and the applicant must pay a license fee and post a bond.
"New York caps the maximum fee chargeable for 'theatrical engagements' at 10% of the compensation paid to the talent, with an exception allowing a fee of 20% for 'engagements for orchestras and employment or engagements in the opera and concert fields.' (California's caps on allowable fees for agents, on the other hand, are governed not by the Talent Agencies Act but by guild regulations.)"
In California, that's true—but the Screen Actors Guild is an exception. Some talent agencies still abide by SAG's franchise agreement with agents. But members of the ATA do not. Three years ago, SAG voting members turned down a new franchise pact with the ATA, so that association's members are subject only to California state regulation.
The Manager Connection
So, if a personal manager in New York finds employment for a performer, can the performer decline to pay a commission to the unlicensed rep?
"Sometimes," responded Stern.
The New York law, he explained, "creates what is known as the 'incidental booking' or 'incidental procurement' exception. This exception, which only applies to representatives who act as personal managers for artists, permits managers to engage in procurement activities when those activities are ancillary to the primary task of managing an artist's career. Although this exception has been in existence since 1917, few New York courts have attempted to define what conduct constitutes 'incidental procurement.' A reasonable interpretation would be that a personal manager can procure employment so long as that procurement is not a primary service provided by the manager to the artist…. If, however, the primary service is the procurement of employment, then the profits realized by the personal manager can be disgorged [surrendered] and possibly voided."
Stern added that the New York courts have ruled that an "unlicensed agent"—such as a personal manager—cannot enforce a contract "explicitly requiring an unlicensed individual to act as an agent." An actor can demand the return of money paid under such a pact.
Section 186(1) of New York General Business Law also reinforces this ruling, Stern noted. The law "indicates that profits wrongfully obtained by unlicensed agents can be disgorged," he said, quoting the statute: "Any employment agency which collects, receives or retains a fee or other payment contrary to or in excess of the provisions of this article shall return the fee or the excess portion thereof within seven days after receiving a demand therefor."
The question for actors, however, is this: Why would a performer want to endanger his relationship with his personal manager by refusing to pay (or demanding the return of) a commission, particularly if the manager is helping the actor make money?
Stern responded, "There are two common scenarios where such a situation may occur. The classic case occurs when (a) the relationship has gone south, (b) the artist fires the manager, (c) the manager sues for commissions, and (d) the artist then seeks to void the contract ab initio [from the beginning] and possibly retrieve commissions that the manager has already received.
"One might also expect an artist to bring a claim when the relationship has fallen apart and the term of the management agreement has expired," added Stern. "After the expiration of the contract, the actor may find it unfair that the manager is continuing to receive commissions. In turn, the manager is likely to sue for breach of contract. The talent can then be expected to bring the case before the labor commissioner, arguing that the manager unlawfully procured employment on behalf of the talent."
