Client Alert: Are You on the Hook for Your Advertising Agency’s Collective Bargaining Agreements?

In recent years, the Directors Guild of America, Screen Actors Guild, Writers Guild of America, and their affiliated pension and health funds (collectively, the “Guilds”) have stepped up their efforts to enact and enforce collective bargaining agreements beyond Hollywood. While the Guilds have historically focused on film and television production, the sharp decrease in feature film production over the past decade has led the Guilds to focus on other content producers. One area that has seen a spike in enforcement is advertising. If your company commissions or produces filmed advertisements, take a minute to consider whether you have direct or indirect obligations under a Guild agreement.

Most major advertising agencies and many production companies are signatories to Guild agreements. Under those Guild agreements, a producer is required to pay Guild members (typically actors, writers, or directors) certain base compensation, additional contingent compensation (often depending on where and how often a commercial runs), and to make contributions to a Guild pension and health fund, among other obligations. If your company has an overall endorsement agreement with an actor, writer, or director that includes the right to film an advertisement – think of Nike’s advertisements featuring Michael Jordan and Spike Lee – the producer of that commercial may be required to allocate a percentage of the actor’s compensation to Guild services and remit pension and health benefits to the Guilds based on that allocation. That allocation percentage and the resulting payments to the Guilds are often negotiable. You may be thinking ‘my company isn’t a Guild signatory and isn’t making those payments, so this isn’t my problem.’ But that’s not necessarily the case.

Many advertising agencies’ engagement agreements require the company that retains the agency to reimburse the agency for any payments to the Guilds. An example of such a provision can be found in a 2009 Ninth Circuit Court of Appeals decision:

“For all talent engaged or used by [Producer] on [Company's] behalf, [Company] agree[s] to pay [Producer] the engagement rate approved by [Company], together with any taxes, pension and welfare fund contributions and other similar payments applicable thereto.  [Company] recognize[s] that [Producer] [is] signatory to collective bargaining agreements with the Screen Actors Guild and other talent-related union agreements, and that the hiring and use of talent by [Producer] on [Company's] behalf will be subject to the terms of such agreements.”

If your company has such a provision in any of its agreements, it may be worthwhile to determine how much you are reimbursing your advertising agency for payments to the Guilds. In some instances, those payments may be negotiable. RKM&C’s Los Angeles-based Entertainment and Media Litigation Department has experience in Guild negotiations. Our team includes a former Assistant General Counsel at the Directors Guild of America. We can help you determine whether you have any such obligations and identify instances where lower Guild payments can be negotiated. In certain instances, an experienced negotiator can save an endorser substantial amounts. 

© 2013 Robins, Kaplan, Miller & Ciresi L.L.P.