Issues relating to minors’ contracts are becoming increasingly important, as more and more young people under the age of 18 are being employed in the entertainment industry. How does the law address the contracts minors enter into? It is important to note that the majority of entertainment industry contracts are formed in the jurisdictions of California and New York. This blog will discuss the enforceability of minors’ contracts in the California jurisdiction.
WHAT IS THE LAW?
Generally, a minor does not have the capacity to bind himself or herself by contract. The minor may void his contracts at any time at his election until the beginning of the day before the minor’s eighteenth birthday. The reasoning is that minors do not have sufficient capacity to understand questions involving contractual rights. Consequently, any person dealing with a minor does so at the mercy of the minor’s right to void the contract. Approval of a contract by the parent or guardian of a minor does not bind the minor.
While common law held that beneficial contracts are binding on minors and prejudicial contracts are void, the law today simply views a minor’s contract as voidable by the minor, regardless of the contract’s merit.
The only exception to a minor’s right to disaffirm a contract is when a contract provides the minor with necessities for life, pursuant to California Family Code section 6712:
A contract, otherwise valid, entered into during minority, may not be disaffirmed on that ground either during the actual minority of the person entering into the contract, or at any time thereafter, if all of the following requirements are satisfied:
The contract is to pay the reasonable value of things necessary for the support of the minor or the minor’s family
These things have actually furnished to the minor or the minor’s family
The contract is entered into by the minor when not under care of a parent or guardian able to provide for the minor or the minor’s family.
THE MINOR EMPLOYEE
The capacity of a minor to enter into an enforceable contract is determined by the governing law where the contract is made, or by the law of a different place intended by the parties to govern. Most contracts for minors in the entertainment industry seek to employ them. However, the minor’s right to disaffirm contracts causes significant problems in the entertainment industry. In order for the industry to utilize the massive number of substantial contracts with minors, there must be certainty in contractual rights. To solve this problem, California has passed legislation providing protections for both industry and minor performers. Employment contracts and their disaffirmance are precluded upon judicial approval of the contract. See California Family Code section 6751, which states:
(a) A contract, otherwise valid, of a type described in Section 6750, entered into during minority, cannot be disaffirmed on that ground either during the minority of the person entering into the contract, or at any time thereafter, if the contract has been approved by the superior court in any county in which the minor resides or is employed or in which any party to the contract has its principal office in this state for the transaction of business.
(b) Approval of the court may be given on petition of any party to the contract, after such reasonable notice to all other parties to the contract as is fixed by the court, with opportunity to such other parties to appear and be heard.
(c) Approval of the court given under this section extends to the whole of the contract and all of its terms and provisions, including, but not limited to, any optional or conditional provisions contained in the contract for extension, prolongation, or termination of the term of the contract.
(d) For the purposes of any proceeding under this chapter, a parent or legal guardian, as the case may be, entitled to the physical custody, care, and control of the minor at the time of the proceeding shall be considered the minor’s guardian ad litem for the proceeding, unless the court shall determine that appointment of a different individual as guardian ad litem is required in the best interests of the minor.
In California, the procedure for court approval of a minor’s contracts involves either the employer or the minor petitioning the superior court in the appropriate county. The appropriate county is either where the minor resides or is employed, or where either party to the contract maintains a principal business office.
The court may then approve the contract upon petition after notice to the other party and an “opportunity to such other parties to appear and be heard.” See California Family Code section 6751(a) and (b). The infant may appear by affidavit.
A parental agreement providing written assent to the contract by the parent or guardian is not required in California prior to confirmation. Such an agreement will be accepted by the court but is not necessary and outside of the court’s authority to confirm.
To approve the minor’s contract in California, the only parties to the proceeding are the employer and the employee.
A copy of the contract must be attached to the petition. It is important to note that pursuant to California Labor Code section 2855, the term of a personal service contract may not exceed seven years.
The Coogan Law, which is encompassed in the California Family Code and California Labor Code, requires that 15 percent of a minor’s gross earning, which is the total compensation payable to the minor under the contract, be set aside by the minor’s employer in trust in a “blocked account” located in California. For the benefit of the minor, the earnings are to be preserved until the minor reaches the age of 18 or is declared emancipated by the courts. The parent or guardian may request that more than 15 percent be set aside. It is important to note that net earnings are all the sums remaining from the minor’s gross earnings after payment of taxes, reasonable support maintenance, training, agency fees, manager fees, commissions, and attorney fees. Moreover, if the minor is employed or agrees to provide services as a musician, singer, songwriter, musical producer, or arranger only, the minor’s gross earnings will include any advances but will exclude the deductions to offset the advance or expenses incurred by the employer. See California Family Code section 6750(c)(1).
This established trust also increases a minor’s control over his own earnings in cases where their contracts are not reviewed by a court. The law covers all minors’ contracts, not solely those approved by the court. In addition, if the services of the minor are being offered through a “loan-out company,” the contracting party is still considered the employer of the minor subject to the California requirements.
Within ten business days of commencing employment, trustee(s) of the funds ordered to be set aside must supply a photocopy of the trustee’s statement to the minor’s employer, and the employer must provide written acknowledgement of such receipt.
Within fifteen business days of receiving the trustee’s statement, the minor’s birth certificate, and a certified copy of the court’s appointment of guardianship if necessary, the employer must deposit 15 percent of the minor’s gross earnings to the trust along with a copy of the minor’s birth certificate.
Any employment permits issued to the minor will be void after ten business days from the date it was granted unless the the trustee’s statement is attached. The permit will then be valid for six months.
If the parent or guardian fails to establish a trust or if the trustee fails to supply the employers with the required documentation, the employer then must forward 15 percent of the minor’s gross earnings pursuant to the contract to the Actor’s Fund of America (AFA). The AFA will become the minor’s trustee and the employer will no longer have the obligation to account for the funds.
PARENTAL LIABILITY AND REVOCATION OF APPROVAL
In California, there are no express statutory provisions addressing whether the minor’s parent is liable under the contract or if the parent may revoke the court’s approval of the minor’s contract. However, California courts have determined that a parent’s signature on the contract may be sufficient to impose parental liability, even in the face of written disaffirmance by the minor during minority. See Raden vs. Laurie, 120 Cal. App. 2d 778 (1953) ; Waisbren vs. Peppercorn Prods., Inc. 41 Cal. App. 4th 246 (1996). Furthermore, California courts would have the inherent jurisdiction to revoke the approval of the minor’s contract on the basis that the court finds the well-being of the minor is impaired by the contract.
THE MINOR EMPLOYER
In California, the same statutory authorization, jurisdictional rules, and procedures for court approval that apply to contracts pursuant to which the minor is an employee also apply to contracts entered into by a minor who is an employer in which another party will render services to or for the minor.
As the minor is acting as an employer, not employee, a trust need not be established; however, a limited guardian must still be appointed to protect the minor as the minor lacks legal capacity to fully bind himself to the contract.
INTELLECTUAL PROPERTY RIGHTS
Entertainment contracts often require the minor to transfer intellectual property rights. California’s disaffirmance statute expressly applies to contracts for the transfer of such rights. According to California Family Code section 6750(a)(2), the California disaffirmance statute also applies to contracts “pursuant to which a minor agrees to purchase, or otherwise secure, sell, lease, license, or otherwise dispose of literary, musical, or dramatic properties, or use of a person’s likeness, voice recording, performance, or story of or incidents in his or her life, either tangible or intangible, or any rights therein for use in motion pictures, television, the production of sound recordings in any format now known or hereafter devised, the legitimate or living stage, or otherwise in the entertainment field.”
As a practical matter, issues involving the minor’s transfer of a copyright can be completely avoided, merely by contracting with the minor on a “work for hire” basis.
In some states, minor entertainers are partially or completely exempted from the applicable labor laws. It is important to consult the labor laws of the relevant states to determine which state’s laws apply and what they require. In California, minors seeking employment in the entertainment industry must obtain an Entertainment Work Permit, which can be obtained through any of the local California Division of Labor’s District offices. The minor must obtain, among other requirements, written verification from the appropriate school district that the minor has satisfied certain district requirements, including age, school record, attendance, and health. The verification must also be filed at the same time as the application for Entertainment Work Permit. The permit will then be valid for only six months and the minor must reapply for renewal in the same manner as for the original permit.
California provides comprehensive regulation in the California Administrative Code, Title 8, sections 11750 to 11765, which discuss the work conditions, work hours, travel time, work time, meal periods, education of minors while working in the entertainment industry, including the studio’s responsibility to provide teachers, the applicability of California’s labor laws when conducting work out of the state, and the parent’s or guardian’s presence on location. In addition, the unions in California, such as the Screen Actors Guild (SAG) and the American Federation of Television and Radio Artists (AFTRA), have also adopted their own regulations that apply to minors.
With the growth of minors’ employment in the entertainment industry, the law governing their employment is significantly more important. Accordingly, it is important to work with an attorney familiar with these laws and regulations.