CALIFORNIA'S "SEVEN YEAR STATUTE" - Repeal of section 2855(b) of the labor code
California's Labor Code Section 2855 (otherwise known as the "Seven Year Statute") limits the amount of time anyone can be held to a contract for "personal services" to a maximum of seven years. In 1987 "Subsection b" was added, which provided a limited exception to the statute for Recording Contracts. Recording artists are now the only class of personal service workers in the state of California who cannot take advantage of Labor Code 2855 and freely negotiate for better terms or seek new agreements after seven years.
The average recording contract requires seven albums with a normal cycle between each album of approximately 18 to 24 months. During the 18 to 24 months, the artist and the label must write, produce, tour, promote, and market the album. If the album is successful, oftentimes the next album is delayed. This makes it virtually impossible for artists to fulfill their contract within seven years.
The California Senate Select Committee on the Entertainment Industry has now held three hearings on recording industry practices. The first hearing was on California's Seven-Year Rule and the exception of recording contracts. As a result, legislation was introduced to repeal subsection b (the exception). RAC and the RIAA entered into extensive negotiations but failed to produce an agreement. That bill was put on hold and will be revisited in the upcoming legislative session. This is crucial legislation for each and every recording artist.
Following California's lead, other states have recognized the importance of limiting the length of personal service contracts. The Speaker of the New York Assembly has introduced legislation and other proposals are currently being considered for introduction in states such as Georgia, Texas, Florida, and Tennessee.
Senate Bill 1246
RAC, along with the American Federation of Radio and Television Artists (AFTRA) and the American Federation of Musicians (AFM), strongly supports California Senate Bill 1246 (SB 1246), sponsored by Senator Kevin Murray to repeal subsection (B) of section 2855 of the California Labor Code.
By enacting section 2855, California lawmakers sought to limit the length of personal service contracts to protect individuals from restrictive and unfair agreements. But in 1987, recording companies, in an effort to subvert and ignore the protection of 2855, "singled out recording artists to be treated differently than all other persons rendering personal service contracts in the state of California." 1 They ultimately convinced the California Legislature and the Governor to enact an exception for recording artists in 2855 subsection (B). This section makes the number of albums delivered to a record label the primary factor in deciding the conclusion of a personal service contract, and ties recording artists to contracts that not only frequently exceed the seven-year limitation, but are often binding for the length of an artist's career. RAC maintains that this discriminatory practice of singling out recording artists is inherently unfair, anticompetitive, and contradicts the basic American philosophy of free market competition.
Recording artists sign recording contracts in good faith, fully intending to honor them. But they are generally unsure of the significance of how the seven-year rule affects them and what impact it will have on the length of their careers. The record companies know from experience that it is highly unlikely artists will be able to fulfill the requirements of delivering seven or eight albums in seven years. The demands recording companies place on their artists, including touring to promote albums, video shoots, and other marketing chores, is overwhelming and time consuming. Furthermore, record companies decide when a record will be released. Many artists, because they have a successful record on the charts, are forced to tour and provide promotional support for that album. The record companies won't allow the release of another album because they don't want it to compete with the already successful album. In some cases it can be years before recording artists have the opportunity to write, record, and release another record. The result is a "catch 22" that makes it impossible for recording artists to fulfill their delivery obligation within seven years.
The recording industry was very profitable prior to the 1987 enactment of 2855 subsection (B). We do not believe that the repeal of this unfair law will be a detriment to the profitability of this industry in the future. Rather, this change will serve to reenergize the free market as artists will have the opportunity to maximize their earning potential on the same, or possibly another, label. By changing subsection (B), there will be less acrimony between artists and record companies and, ultimately, the fans and the public will benefit most.
1 Letter to the Senate Select Committee on the Entertainment Industry by Jay L Cooper, August 30, 2001.
