DAN MORALES

.ATTORNEY GENERAL 

## QBffice

oftty Bttornep Q&nerd Qtate of lltexae November 27,lWl
Mr.Larry E. Kosta Executive Director Opinion No. DM-60 Department ofLicensingandRegulation Re: Whether a talent agency that P.0. I3ox12157 .follows certain amendments to Screen Austin Texas 78711 Actors Guild franchise regulations wouldviolate the Texas Talent Agency Act, article SUla-9, V.T.C.S. (N-146)
Dear Mr. Kosta:
You have asked whether a Texas talent agency franchised by the Screen Actors Guild1would violate the Texas Talent Agency Act, article 5221a-9,V.T.C.S., by adhering to certain franchise regulations. At issue are recent amendments to the Screen Actors Guild Codified Agency Regulations, Rule 16(g). Rule 16(g)includes the basic contract between the Screen Actors Guild and the Association of Talent Agents and the National Association of Talent Representatives, and controls the contractual relationship between the Screen Actors Guild and all franchised talent agencies, including franchised talent agencies inTexas.2 Your letter summarizes the effect ofthe amendments to Rule 16(g)as follows:

In both the franchising agreement [Rule 16(g)] and the amendment, [the Screen Actors Guild] considers all talent represented by a franchised agent to be [Screen Actors Guild] members, regardless of actual membership and that the agents should .be restricted in the representation of their non-union

‘TIE Screen Actors Guild is a aational union which nprcsents performers in the motion pichuc and television industry.

%ent age&es represent performcr~ plaeiq them inperforming employment for afee. The. ScxeeoActors Guild attempts to regulate talent agencies by frahisiog them. The Association of Talent Agents and the National Association ofTalent Representatives arc trade organizations which represent alargenumber offranchised talent agenciesthroughout the country.

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talent to only producers who sign contracts with [the Screen Actors Guild].
Furthermore, the [Screen Actors Guild] franchised talent agency, if it represents non-union talent to producers who are also non-union, must forfeit all fees and commission[s] to the union.

In a brief submitted to this office, the Screen Actors Guild disagrees with this characterization ofRule 16(g) and the effect of amendments. Because we do not interpret contracts in the opinion process, we simply accept your characterization as correct. We express no view on the correct interpretation of the amendments to Rule 16(g).3

To answer your question whether the amendments to Rule 16(g), as you interpret them, would violate the Texas Talent Agency Act, we first consider both the legislative history of the statute and its general framework. The Texas Talent Agency Act (hereinafter “the act”) was adopted in 1989.4 According to the House Bill Analysis, prior to 1979 talent agencies, were subject to rules regulating employment agencies under article 5221a-6,V.T.C.S. See House Comm. on Labor and Employment Relations, Bill Analysis, S.B.759,71st Leg. (1989). In 1979,that provision was rewritten, and talent and modeling agents were eliminated from its licensing and regulatory requirements. Id. As a result, talent agencies were unregulated, and as the bill analysis states, “many ffly by night’ operations

...infiltrated the industry and [were taking] advantage ofthe consumer.” Id. Clearly, the purpose of the act was to remedy this situation by regulating the industry. Id.

!We also note that the briefs submitted by counsel for the Sczen Actors Guild and various Texas talent agencies address at great length the legality of the amendments to Rule 16(g) under Texas ’ antitrust and righttowork statutes. The purpose ofthe opinion process isto address questions affectingthe public interest orconcerning the off~c@duties ofgovernmental o&ials posed byspecitic, statutorily-authorized reqwstors, not to address questioos posed by private parties. See Ten Coast. art. IV, 522; Gov

’t Code $402.042(a). Because.your request seeks an opinion onlywith respect to the TexasTalent Agency Act, we must confine our analysistothat provision.
4S.B.159,Acts 1989,71st Leg.,ch.202,at869.

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Significantly, it is evident from the bill analysis that the act was enacted to protect consumers, ie. the artists5 who use talent agencies to obtain employment, rather than talent agencies themselves. That the primary purpose of the act is to protect artists isalso evident from its substantive provisions. First and foremost, the act protects artists by requiring talent agents to register with the Department of Licensing and Regulation (hereinafter “the department”)6 and to post surety bonds with the department. Id; see &soV.T.C.S. art. 5221a-9, 852, 5. The act also sets forth certain prohibited conduct, including operating a talent agency without a certificate ofregistration, charging artists registration or advance fees, and splitting
a fee with a person who is not registered under the act. V.T.C.S. art. 5221a-9, B2. In addition, the act provides certain specific protections for artists, including restricting the manner inwhichtalent agencies handle funds on behalf ofartists and requiring that talent agencies provide artists with complete, written contracts. Id $6 10(b), 12. The department isvested with rulemaking authority to implement the act. Id 93(a)(3).
The act contains several enforcement provisions. First, a contract that does not comply with the act isvoid and unenforceable. Id P 13(a). Second, violations of the act are deceptive trade practices, and the act incorporates~the remedies set forth in chapter 17 of the Business and Commerce Code. Id 5 13(b). Third, the department may institute an action for injunctive relief to enjoin violations of the act. Id $ 14. Finally, a person who knowingly or intentionally violates the act commits a ClassAmisdemeanor. Id $? 15;seeaLroPenal Code 5 12.21.

You have specifically asked whether the Screen Actors Guild amendments to Rule 16(g)would cause franchised talent agencies to violate sections 2(b), 2(c), or 10(b) ofthe act. We examine each ofthese provisions in turn. Section 2(b) ofthe actprovides:

A talent agency may not charge, asa condition ofregistering

any applicant or representing any artist, a registration or

3We use the term “artist”as it is detined in the Texas Talent Agency Act to include adors, musicians, directors, writers, and other professionals in the entertainment industry. See V.T.C.S. art. SZ?la-9,%l(1); seealso 16TA.C. 078.10. %khougb the act refers to the Department ofLabor and Standards, the name ofthe agency was changed to the Department of Licensing and Regulation in 1989. See Acts 1989, 71st Leg., ch. 1039,%6.03,at4231.

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advance fee and may not require the applicant or artist to subscribe to, use, or use the services of any specific publication, video or audio tapes, post card service, advertisement service,
resume service, photographer, or acting or modeling school or workshop.
The amendments to Rule 16(g) as you describe them would not directly implicate this provision. They would not require talent agents to charge a registration or advance fee, nor would they require talent agents to require artists to use any specitic,publication, video or audio tapes, post card service, advertisement service,
resume service, photographer, or acting or modeling school orworkshop.
Section 2(c) ofthe actprovides:

A talent agency may not split or share fees with a person whoisnot registered under thisAct.
As you understand the amendments to Rule 16(g), they would require the talent agencies to forfeit to the Screen Actors Guild commissions earned from nonunion artists who are employed by nonunion producers. You suggest that this would constitute fee splitting inviolation ofsection 2(c). Given the broad language ofthis provision, we agree that forfeiting fees to a third person could constitute splitting or sharing fees under the act. Thus, on the face ofthe act, itwould appear that section 2(c) would prohibit talent agents from forfeiting fees to the Screen Actors Guild since the Screen Actors Guild isnot registered asatalent agencyunder the act.
We note, however, that the department’s regulations interpreting the act appear to compel a different conclusion. The administrative regulations promulgated pursuant to the act interpret section 2(c) as follows: “Atalent agency may not split or share fees with any person whok requiredtobe butisnot~registered under the Act asa talent agency.” 16T.A.C. 578.76(b) (emphasis added). The regulations also expressly state that the term “talent agency” does not apply to “a union that represents artists and whose efforts to obtain or attempt to obtain employment for its members is casual m nature only,” and exempts such unions from the requirements and prohibitions of the act. Id g7830(b) (“Exemptions”). In their briec the Texas talent agencies concede that the Screen Actors Guild does not

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obtain or attempt to obtain employment for its members.’ Assuming that this is actually the case, the Screen Actors Guild is not required to register as a talent agency. Therefore, it would appear that the act, as interpreted by the department’s regulations, would not prohibit talent agencies from splitting or sharing fees with the Screen Actors Guild.

We further note that there isan apparent inconsistency between the act and the department’s regulations. Section 2(c) ofthe act prohibits talent agencies from splitting or sharing feeswith anyperson whoisnot registered under the act. The act defines the term “person”broadly to mean “anindividual, corporation, organization, business trust, estate, trust, partnership; association, or any other private legal entity.” V.T.C.S. art. 5221a-9, 3l(5). As noted above, however, title 16, section 78.76(b), of the Texas Administrative Code merely prohibits a talent agency from splitting or sharing fees with “anyperson who isrequired to be but isnot registered under the act as atalent agency.” Thus, while the actwould prohibit talent agencies from splitting fees with any nonregistered person, the regulations apparently would permit talent agencies to split fees withpersons whoare not registered under the act but are not required to register. Generally, regulations interpreting a legislative provision promulgated by an agencywiththe authority to implement the provision are presumed valid, see2TEX. JUR.3dAdmin~adve Law $9 18,85 (1979), and are regarded as having the force and effect oflaw,id 0 19. An order which exceeds an agency’sauthority, however, isinvalid. Id 0 16at 209. Given the apparent inconsistency between section 2(c) of the act and section 78.76(b) oftitle 16of the Texas Administrative Code, we must consider whether the latter is a valid regulation or whether the department has exceeded its authority.
The critical factor in determining if an agency has exceeded its rulemaking authority iswhether the regulation isin harmony witlrthe general objectives ofthe

‘In their briefs, the Texas talent agencies contend that this regulation doea not exempt the ScreenActors Guild from the prohibitions of section 2(c) because the ScreenActors Guild does not attempt to obtain employment for its members in any respect. They contend that the regulation exempts onfy unions which casually attempt to obtain work for their members. We fmd this interpretation of tbe regulations unpersuasive. Clearly, the regulations are intended to exclude n/l entities which do not obtain or do not attempt to obtain employment for artists from the requirements ofthe act. This regulation merely clarifiesthat unions which casually attempt to obtain employment for their members are also exempt. Tbe regulation is clearlynof intended to exclude unions which
neverengage insuch activitiesfromthe exemption.

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statute. Gerst v. Oak CliffSav. & ban Ass’n, 432 S.W.2d 702, 706 (Tex. 1968). Applying this factor, we conclude that the regulation regarding the section 2(c) fee splitting prohibition is not inconsistent with the general objectives of the act. As noted above, the primary purpose ofthe act is to protect artists by requiring talent agencies to register with the department. See House Comm. on Labor and Employment Relations, Bill Analysis, S.B. 759, 71st Leg. (1989). The purpose of section 2(c) appears to be to enforce,the registration requirement by preventing persons who fail to register from continuing to earn fees. The regulation does not conflict with this purpose because it does not exempt persons who are required to register from the registration requirement. Although the regulation does limit the scope of the section 2(c) fee splitting provision to exclude persons who are not required to register, webelieve that this isnot problematic because the act is simply not intended to regulate the conduct ofpersons who do not obtain employment for artists. We believe that the department did not exceed its authority in enacting this regulation and that itisvalid. On thisbasis,weconclude that section 2(c) would not prohibit talent agents from forfeiting fees to the Screen Actors Guild. Finally, we consider whether the amendments to Rule 16(g) would violate section 10(b) ofthe act. Section 10(b)ofthe actprovides:

A registrant who receives any funds on behalf of an artist shall deposit those funds in an account maintained in a financial institution covered by federal deposit insurance. The funds may be disbursed only asprescribed bydepartment rule.
The department regulations set forth the length oftime within which talent agencies must disburse such funds to artists and the records they must maintain with respect to such funds. 16T.A.C. 978.72. Apparently, your concern isthat forfeiture offees by the talent agencies to the Screen Actors Guild would run afoul ofthis provision. We conclude, however, that this provision does not speak to how talent agencies handle monies after artists have been fully compensated. The purpose of this provision appears to be to protect artists from unscrupulous talent agencies by regulating how talent agencies disburse funds to which artists are entitled as payment for their work. It is clearly nor intended to protect talent agencies. Certainly, this provision would preclude a talent agency from disbursing an artist’s monies to a third person. It appears, however, to have no bearing on the disbursement of monies a talent agency retains as a commission after proper and complete disbursement of funds to an artist. Thus, we believe that section 10(b) would not prohibit a talent agency from forfeiting its own monies to the Screen

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Actors Guild after ithad properly disbursed to the artist all funds to which he or she isentitled.

SUMMARY

Talent agencies would not violate sections 2(b), 2(c), or 10(b) ofthe Texas Talent Agency Act, article 5221a-9, V.T.C.S., by following certain amendments to Screen Actors Guild franchise regulations, as those amendments are interpreted by the-Department ofLicensing andRegulation.

DAN MORALES Attorney General ofTexas

WILLPRYOR First Assistant Attorney General

MARY KELLER Deputy Assistant Attorney General
JUDGE ZOLLIE STEAKLEY (Ret.) Special Assistant Attorney General
RENEA HICKS SpecialAssistant Attorney General

MADELEINE B.JOHNSON Chair, Opinion Committee Prepared byMary R. Crouter Assistant Attorney General

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