Governor Gavin Newsom has signed SB 271 into law. The law clarifies that California (CA) serves as the correct state for Motion Picture Payroll Services Companies (MPPSCs) to submit unemployment insurance (UI) and state disability insurance (SDI) contributions for CA-resident production workers who are sent to work in other states. The law confirms EP’s long-standing practice of remitting UI and SDI contributions to CA for CA multi-state production workers and provides clarity for other MPPSCs. The law becomes effective on January 1, 2020.
The law governing UI and SDI reporting is complicated in the entertainment industry. The entertainment industry workforce moves frequently from one production to another, both within and outside CA, and many CA-resident production workers are hired to work on productions in other states. MPPSCs operate as the employer of production workers for UI/SDI purposes and must apply CA law to determine which state is entitled to UI and SDI taxes for multi-state production workers.
MPPSCs utilize a four-part test under CA Unemployment Insurance Code (CUIC) §§ 602 and 603 to determine the correct state to remit unemployment and state disability contributions: (1) state where work is localized, (2) state of base of operations if the work is not localized in one state, (3) state of direction and control if no localization or base of operations exists in one state, and (4) employee resident state if none of the three above exist in just one state. The four-part test, developed in the 1950s, does not reflect changes in motion picture employment relationships and production practices and no longer serves as a meaningful guide to employers in the entertainment industry. The unique nature of the motion picture industry and the involvement of MPPSCs have made it virtually impossible to clearly identify a “base of operations” for the production or a place from which production services are “directed and controlled” and to apply the test under CUIC § 602 consistently to determine the appropriate state of employment for UI and SDI contributions.
This uncertainty has caused confusion and delay for CA-resident production workers. For example, if a CA production worker is sent to work on location in another state, remitting the UI and SDI taxes to the work state instead of CA as the resident state denies the production worker UI and SDI credit in the state where the worker is most likely to apply for and receive benefits. This could reduce the CA production worker’s UI and/or SDI benefit or impact the CA production worker’s eligibility for benefits in CA. While EP consistently has treated CA as the place of employment in situations involving CA-resident multi-state production workers and therefore remitted UI and SDI taxes to CA, other MPPSCs have interpreted the four-part test differently and credited the UI and SDI (if applicable) taxes to the work state.
The enactment of SB 271 clarifies this long-standing problem. It ratifies the use of resident state for CA production workers who are employed on productions in another state and confirms that CA operates as the state of employment for UI and SDI purposes involving CA multi-state production workers. Specifically, SB 271 amends the four-part test under CUIC §§ 602 and 603 to make clear that in situations involving work outside of CA, the production worker’s entire employment on the project is credited to CA for UI and SDI purposes if (A) the worker is a resident of CA; (B) the worker is hired and dispatched from CA; and (3) the worker intends to return to CA to seek reemployment after the assignment outside of the state concludes. In this scenario, the worker’s out-of-state employment on the project is treated as incidental to CA under CUIC § 603.