Hollywood faces 'devastating' costs from state bill targeting the gig economy
This fall, Hollywood studio executives may be in for a shock when it comes to their budgets. A bill winding through California's legislature that takes aim at gig-fueled companies like Uber and Postmates may upend long-standing showbiz practices by reclassifying scores of independent contractors as employees, and could render tax-lucrative loan-out companies useless.
Tax rules are independent of labor rules and aren't directly addressed by the legislation, which means the status quo could remain for workers in that regard. But Hollywood business manager Bob Jason of NKSFB is dubious about whether many companies would opt to treat someone as an employee for one purpose and an independent contractor for another — especially when a misclassification carries financial penalties.
It's unclear how much this bill would cost the entertainment business in total, but the state of California estimates it loses out on $7 billion in payroll tax revenue each year because of alleged misclassification across all industries. Economist Chris Thornberg of Beacon Economics says the bill aims to solve a problem that's been overblown. "California's economy has the lowest unemployment rate it has ever had," he says.
Economist Kevin Klowden of the Milken Institute identified one Hollywood worker subset that could see an upside to this particular test: people who don’t work quite enough in California to qualify for benefits through a guild or union. Under this bill, they could be entitled to health benefits if they’re working full-time. But, there’s nothing to stop a company from terminating its “employees” at the end of any production.
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