The SAG-AFTRA Short Project Agreement and New Media signatory agreement (under $50k) allow you to defer payment to your performers. This means the performers do not get paid until the terms of deferral are met, which most commonly would be when the project is sold or generates income. Pension and Health contributions and payroll taxes are not due until payments are actually issued to the performers, which means you will not incur those costs until later on when wages are paid. Unlike the other payroll fringes, workers compensation insurance coverage is required by law at the time work takes place, which can present a unique problem.
Insurance options & payroll
Productions often rely on payroll services to provide workers compensation insurance coverage—but if there is no payroll to process, the payroll house would not be involved at the time of the shoot. It can be difficult to find affordable workers compensation insurance coverage for short-term productions apart from payroll, which creates a catch 22 situation. This can become further problematic if an employer tries to obtain affordable insurance coverage through payroll by stating an intention to pay performers, and then canceling payroll services afterwards (if there are no accidents / injuries) to avoid actual payroll costs. Attempting to defer payments after-the-fact can be in violation of the SAG-AFTRA deferment option, and could even constitute an act of insurance fraud against the payroll house. Having employees work without workers compensation coverage puts the employer at risk of violating state law and the SAG-AFTRA CBA, and is also a significant liability risk in the case of an un-insured accident or injury; so what’s the solution?
When payment is being deferred, production must obtain workers compensation insurance coverage directly, either from an insurance company or through an insurance broker. Some states have a State Fund insurance option as well, where employers can obtain standalone workers comp coverage from a state-run program. A payroll house cannot provide insurance coverage when performers are not being paid through the payroll system; only those being paid are covered. This means that there are two distinct options: either performers are being paid and workers compensation is provided through payroll, OR performers are deferred and workers compensation is obtained through an insurance specialist.
3rd party coverage and State Fund insurance
ABS recommends being cautious when using a co-production company or other 3rd party to obtain workers compensation insurance coverage. Some companies may advertise themselves as a “co-production company” that also provides insurance coverage for your cast and crew for a fee, but such arrangements are often illegitimate. If the co-production company is not hiring or paying your employees, then their insurance company would likely have no obligation to cover any accident or injury to those workers. Keep in mind that a co-production agreement does not guarantee coverage if the insurance company has not agreed to the terms; bottom line: a company can’t just sell you their coverage, it should be done through the insurance company or broker that provided the policy in the first place. In recent years, this has been a growing problem with companies who use California State Fund insurance and try to sell their policy to other productions—CA State Fund does not allow 3rd parties to be covered under policies they issue, only employees of the named employer are covered.
Additional Insured? Don’t be tricked
Remember that if your company has been issued a Certificate Of Insurance (COI) naming you as “additional insured”, this designation only applies to the policies that are actually checked off in the “ADDL INSR” section. This is a common trick to tell a company that they are covered under workers compensation because of being listed as additional insured on a COI, but 3rd parties cannot actually be “additional insured” on a workers comp policy. If you look in the additional insured section for workers comp, you will see “N/A”: not applicable.
Deferment must be agreed to by the production company and the performers prior to work taking place. It is the obligation of the employer to negotiate deferment with their performers, or pay everyone out according to the normal SAG-AFTRA pay schedule. Additionally, when signing a payroll service agreement, the production company is stating its intention to pay out performers. Just because the union allows deferment, this does not mean a production company can ignore contractual obligations to the payroll house.
There are also restrictions on what may or may not be deferred under the SPA/New Media agreements. Pay items such as meal penalties and double overtime cannot be deferred in any situation, which means you should plan your payroll and insurance options carefully if you will be working long hours.