Entertainment
Hollywood loan companies potentially in trouble
The California state department responsible for providing unemployment benefits is challenging the common industry practice of paying workers through loan companies rather than directly, according to a major Hollywood payroll provider.
“The California Employment Development Department (EDD) has informed Cast & Crew that payments made for the loans should have been made directly to the owner/shareholder of the loaned company as wages,” the employment provider said. Cast & Crew pays in an email sent to industry workers Friday. “This is expected to quickly become an industry-wide problem.” It will not be specific to payroll processed by Cast & Crew and will apply statewide, regardless of payroll provider.
According to the payroll service provider, the EDD's position “appears to broadly target the use of loan companies in the entertainment production industry and would have a major impact on loans working on countless productions in California.”
Many Hollywood workers – from screenwriters to reality TV producers – have created loan companies, which provide both protection to businesses and can give those workers a tax benefit. By forming an S-Corporation, C-Corporation, or LLC, workers become “employees” of that entity and their compensation is paid to the company, which then pays the individuals. According to a blog post from payroll service provider ABS Payroll, production companies can also benefit from using loans: “Taking out a loan can save the production company money because she will not have to pay social security contributions for this person. “, the message says.
The Hollywood Reporter has contacted EDD, Cast & Crew and several other major Hollywood payroll providers for comment.
Cast & Crew opposes this position, the company said in its memo, and is working with entertainment companies and union leaders to address what it calls this “extremely important issue.” Payroll informed email recipients that loan companies “under review” should receive notices within the next 30 days. These businesses can then “join the challenge to the EDD’s attempt to invalidate the use of loans” by filing a petition.
In a statement, a spokesperson for the actors union SAG-AFTRA said it was aware of the EDD's position on loan companies. “We are in contact with Cast & Crew and other entertainment unions on this matter. We will work with the industry, our sister unions and government as the situation evolves,” the spokesperson added.
IATSE, meanwhile, said in a statement: “We are aware of an EDD audit at Cast & Crew and are looking into it.” The Writers Guild of America West added: “We are in contact with our sister unions on this matter. WGA West will take all necessary steps to preserve the long-standing use of loans in this sector.
Meanwhile, Cast & Crew said in its communication: “There are currently no restrictions on our continued processing of payments to loan companies, and we will continue to do so as usual. »
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