SB 422, which clarifies the responsibilities of loan-out companies and motion picture payroll services companies for the purposes of remitting unemployment insurance taxes and related obligations, including income tax withholding, was signed by Governor Newsom today.
Under the legislation, the loan-out company, solely for the purpose of remitting employment taxes, is deemed to be the employer of the employee-owners or members who are engaged by the loan-out company to provide services to a motion picture production company or an allied motion picture services company. SB 422 does not alter or modify any other laws with regard to loan-out companies or their employees, meaning that the motion picture company would likely still be treated as the employer for items such as wage and hour laws, etc.
Earlier this year, we reported that the EDD had been auditing and assessing motion picture payroll services companies on the basis that the motion picture companies and not the loan-out corporations were the employers of the loan-out corporation shareholders/employees. After passage of AB 5 and its adoption of the ABC test for purposes of determining whether a worker is an independent contractor or an employee, it has been unclear who is the employer when a motion picture company hires a person to work on a production through a loan-out corporation.
The legislation states that the changes made by SB 422 regarding who is responsible for remitting the employment taxes “is declaratory of, and not a change in, existing law.”
The text of SB 422 is available at:
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