While the presidential and congressional elections are understandably getting most of Hollywood's attention, along with the world's, there were a few other items put to voters that could affect the entertainment industry.
THR talked with industry experts about three California propositions — those involving affirmative action, app-based drivers and consumer privacy — and what their likely results mean for Hollywood.
Proposition 16: This measure, which is projected to fail, would have repealed a provision in California's constitution that bans state and local governments from discriminating against, or giving preferential treatment to, people based on their race, ethnicity, national origin or sex. Proponents of the measure argued it would create opportunities for women and people of color by removing the state's ban on affirmative action and allowing government employers and public educational institutions to level the playing field.
Because it looks like the measure won't pass, the status quo remains — which Beacon Economics Research Director Adam Fowler tells THR could negatively impact the workforce. He notes, "Anything that our UC and Cal State systems can do to promote diversity only helps all of our industries over the long term."
Proposition 22: Last year's passage of AB 5 freaked out freelance writers, Hollywood business managers and ride share companies by reclassifying scores of independent contractors as employees. It changed the standards used to make that classification in response to the California Supreme Court's 2018 Dynamex decision, which held that delivery drivers are presumptively employees unless their employer can prove they aren't using a three-pronged ABC test. Industry-specific exemptions and subsequent amendments have eased the concerns for many workers, including musicians and journalists, but companies like Uber and Lyft had to wait for California voters to step in.
Prop. 22 is expected to pass and it will make drivers for app-based companies, including those offering ride share and food delivery, independent contractors instead of employees regardless of the AB 5 test. Proponents have touted that it will offer those drivers a minimum earnings guarantee (120 percent of the minimum wage plus up to $0.30 per mile in expenses), contributions toward health care costs, insurance to cover accidents and illnesses that happen on the job and protection against discrimination and harassment. Critics say those benefits don't measure up to what drivers would receive as employees, especially with regard to unemployment and sick pay.
While the measure is only targeted at app-based drivers and their employers, experts tell THR that it could have both direct and tangential effects on Hollywood.
"Companies could decide to use more drivers from such companies to avoid treating drivers as employees and covering them under Teamsters or IATSE contracts," says entertainment industry labor lawyer Ivy Kagan Bierman of Loeb & Loeb. "I have no doubt that the unions will push back against this in negotiations with companies and in potentially seeking further legislative amendments."
She also notes that its passage could spark more amendments to AB 5 that would exempt more workers, especially those who use their own equipment and set their own schedules.
Tricia Legittino, co-chair of the litigation and employment groups at Frankfurt Kurnit, agrees. While she says the margin by which the measure passed — currently it has more than 58 percent of votes — shows the test isn't popular, she doesn't expect state lawmakers to address Hollywood's concerns on its own. "The entertainment industry did get some relief from the ABC test when the law was amended in September but, in my opinion, the amendments did not go far enough," Legittino says. "If the entertainment industry wants any tangible effects from Prop. 22 it is going to have to be proactive like Uber and Lyft were to get the law changed because it does not seem as if the legislature will take up the cause on its own to make any wide-sweeping changes for the entertainment industry."
Proposition 24: The California Privacy Rights Act of 2020 establishes the California Privacy Protection Agency and expands protections for consumers' data privacy by limiting how businesses can use and share "sensitive personal information," which includes geolocation, race, ethnicity and health data. The likely passage comes just months after its predecessor, the California Consumer Privacy Act, became ripe for enforcement. Data privacy expert Rachel Marmor of Davis Wright Tremaine notes that parts of the CPRA are designed to close loopholes in the CCPA.
"CPRA will require businesses to offer an opt-out from most if not all targeted advertising," she says. "This change is clearly designed to address some businesses' efforts to define CCPA requirements narrowly and avoid the opt-out. For entertainment companies whose businesses models are based on advertising revenue, this change is going to require them to rethink operations."
In some respects, the new law is less restrictive, notes Mark McCreary, co-chair of Fox Rothschild's Privacy & Data Security practice. Prop. 24 applies to any company that buys or sells personal information from 100,000 or more consumers per year, has $25 million or more of annual revenue, or derives at least 50 percent of its revenue from selling or sharing consumers' private information. "That actually covers fewer businesses than under the CCPA, which had a 50,000 threshold," says McCreary, adding that it also allows companies to track consumers once they physically leave California.
Still, privacy and data security attorney Daniel Goldberg of Frankfurt Kurnit says the CPRA imposes undue burden on businesses that spent billions getting into compliance with the last set of new regulations. "The CPRA introduces many new obligations, which will only result in increased uncertainty and spending to meet constantly moving targets," he says, adding that the rights created by the new law could impact the bottom line of companies that rely on advertising revenue and the statute can't be amended by the state legislature unless the changes are made to enhance privacy.
"Consumers now have the right to opt-out of the sharing of their personal information for the purpose of cross-context behavioral advertising," Goldberg notes. "While the right to opt-out of the sale of personal information under the CCPA arguably already encompassed this right, the CPRA makes the right explicit."
Adds McCreary, "Affected companies in the entertainment industry will want to pay particular attention to the data minimization, purpose limitation and storage limitation concepts to ensure compliance."
And Marmor warns that digital entertainment companies should closely watch rulemaking that happens under the new law. "One of the topics that the new California Privacy Protection Agency is required to take up is disclosures concerning the use of automated decisionmaking technology," she notes. "The mandate is broadly written such that regulation could potentially apply to services such as entertainment recommendations powered by AI."
The new rules will become effective Jan. 1, 2023 and will only apply to information collected by businesses from Jan. 1, 2022 on. (Read the full text here.)
Experts agree its likely that other states will follow California's lead as the new law brings regulations closer to those used in the European Union.
"Businesses around the world that collect information about California residents will need to comply with the obligations set out in the CPRA, and I expect many other U.S. states will look to California in constructing their own privacy laws," says Goldman.
Marmor adds that she expects the consumer privacy landscape to become more complicated in the coming year as more states take up the issue, but she isn't sure it will be a priority at the federal level.
"We’re continuing to see movement on a few state privacy bills where legislatures have not adjourned for the year, and expect to see a number of states take up the issue of privacy when new legislators are sworn in in January," she explains, adding that the sponsor of the failed Washington Privacy Act has indicated he'll take another shot at introducing a new law in his state. "At the federal level, the prospect of federal legislation likely comes down to whether Democrats take control of the Senate. Bi-partisan legislation is possible, but the parties have not been able to agree on some key issues in the past, like including a private right of action. And COVID relief is likely to be a higher legislative priority."