SEVEN-YEAR STATUTE BILL REVISED

SB 1246, that pesky piece of legislation introduced by California Senator Kevin Murray on Jan. 7, received its first amendment since going into committee review on Jan.17. The amendment was entered into the State Senate record Feb.21.

The original bill sought to amend California Labor Code Section 2855 (a.k.a. the seven-year statute) by deleting a 1987 amendment that made recording artists subject to restrictions not required of contract employees in other industries. That amendment, which came to be known as the "music industry exemption," requires recording artists to give their employers written notice that they no longer intend to render services after a specified date, and grants labels the right to recover damages for undelivered albums.

The amendment to the bill seeking to delete the amendment, er, the first revision to SB 1246 still seeks to delete the 1987 amendment (subsection (b) of Labor Code section 2855); the amended part of the bill involves the addition of a declaration making the statute's coverage of all residents of California more explicit.

According to the Senate Legislative Counsel’s Digest, "This bill would make findings and declarations concerning the 7-year limitation, would declare as the policy of the state that it may not be waived by the employee, and would delete the provisions relating to personal services in the production of phonorecords and the recovery of damages for certain breaches of contracts related to the production of phonorecords." In other words, the statute applies to everyone, regardless of occupation, is covered.

The new language invokes the landmark 1944 case of De Haviland v. Warner Bros. Pictures, quoting from it and confirming its meaning. The amended bill states, "The Legislature confirms the holding of [De Haviland v. Warner Bros.], that seven years is fixed as the maximum time for which employees ‘may contract for their services without the right to change employers or occupations. Thereafter, they may change if they deem it necessary or advisable’ in order to employ their abilities to ‘the best advantage and for the highest obtainable compensation.’" Also: "The Legsilature finds that if it were possible for an employee to waive by agreement his rights under the law, the law would be meaningless."

This amendment appears to raise the stakes in the ongoing struggle between the Recording Artists Coalition and the record labels, who oppose the passage of Senator Murray’s bill on the grounds that losing the right to sue for damages would shift the contractual balance of power between the labels and their artists and irrevocably damage the labels’ businesses. If SB 1246 passes as currently amended, it would leave no doubt that everyone in California is free to void a personal service contract after seven years, without exception or repercussions.

Below, the text of the Murray bill as amended, and the text of the statute as it stands today.

THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

SECTION 1. It is the policy of the State of California that no employee shall be contractually bound to an employer beyond seven years. The Legislature confirms the holding in De Haviland v. Warner Bros. Pictures (1944) 67 Cal.App.2d 225, that seven years is fixed as the maximum time for which employees "may contract for their
services without the right to change employers or occupations. Thereafter, they may change if they deem it necessary or advisable" in order to employ their abilities to "the best advantage and for the highest obtainable compensation."

In accordance with this holding, it is the policy of this state that this protection may not be waived by an employee and that employees as a group have the right to change employers or occupations after seven years. The Legislature finds that if it were possible for an employee to waive by agreement his rights under the law, the law would be meaningless. Therefore, the Legislature declares that a contract for personal services, whether for general services or "exceptional" services as described in De Haviland v.
Warner Bros. Pictures, supra, may only be enforced for a term not exceeding seven years from the commencement of services under it.

Furthermore, it is the policy of the state that these protections
be afforded to each and every resident of the State of California and
that this requirement may not be waived by contract.

SECTION 2. A contract to render personal service, other than a contract of apprenticeship as provided in Chapter 4 (commencing with Section 3070), may not be enforced against the employee beyond seven years from the commencement of service under it. Any contract, otherwise valid, to perform or render service of a special, unique, unusual, extraordinary, or intellectual character, which gives it peculiar value and the loss of which can not be reasonably or adequately compensated in damages in an action at law, may nevertheless be enforced against the person contracting to render the service, for a term not to exceed seven years from the commencement of service under it. If the employee voluntarily continues to serve under it beyond that time, the contract may be referred to as affording a presumptive measure of the compensation.

CALIFORNIA LABOR CODE, SECTION 2855 (THE LAW AS IT STANDS TODAY):

2855. (a) Except as otherwise provided in subdivision (b), a contract to render personal service, other than a contract of apprenticeship as provided in Chapter 4 (commencing with Section 3070), may not be enforced against the employee beyond seven years from the commencement of service under it. Any contract, otherwise valid, to perform or render service of a special, unique, unusual, extraordinary, or intellectual character, which gives it peculiar value and the loss of which can not be reasonably or adequately compensated in damages in an action at law, may nevertheless be enforced against the person contracting to render the service, for a term not to exceed seven years from the commencement of service under it. If the employee voluntarily continues to serve under it beyond that time, the contract may be referred to as affording a presumptive measure of the compensation.

(b) Notwithstanding subdivision (a):

(1) Any employee who is a party to a contract to render personal service in the production of phonorecords in which sounds are first fixed, as defined in Section 101 of Title 17 of the United States Code, may not invoke the provisions of subdivision (a) without first

giving written notice to the employer in accordance with Section 1020 of the Code of Civil Procedure, specifying that the employee from and after a future date certain specified in the notice will no longer render service under the contract by reason of subdivision (a).

(2) Any party to such a contract shall have the right to recover damages for a breach of the contract occurring during its term in an action commmenced during or after its term, but within the applicable period prescribed by law.

(3) In the event a party to such a contract is, or could contractually be, required to render personal service in the production of a specified quantity of the phonorecords and fails to

render all of the required service prior to the date specified in the notice provided in paragraph (1), the party damaged by the failure shall have the right to recover damages for each phonorecord as to which that party has failed to render service in an action which, notwithstanding paragraph (2), shall be commenced within 45 days after the date specified in the notice.