Written by Joanne Cachapero

http://www.xbiz.com/articles/23718/fattorosi
The “mainstreaming” of adult may mean wider markets and increased revenue to some content producers. For performers, going mainstream promises recognition and legitimacy beyond being stereotyped as a mere adult star.

Even as the adult business environment becomes more corporate, few are ready to consider what effect mainstreaming will have on the way business is conducted. In an industry that, for the most part, operates under the radar and has been largely self-regulated, can standard business models and practices ever replace what is aptly described as a “Wild West” mentality?

Presumably, most major adult multimedia corporations and larger studios have had to integrate basic business practices in order to minimize potential risks and maximize their ability to expand into highly visible positions in the marketplace. Performers interested in tax advantages may choose to incorporate and become “employees” of their own companies.

In a January 2007 article appearing in the San Francisco Chronicle, Kink.com CEO/founder Peter Acworth was quoted saying, “We have a clean and safe work environment, the models are well-paid and they are explicitly covered by workers’ comp.”

Acworth was defending his multimillion-dollar web-based company against accusations that female performers were being exploited, an attack made by community activists opposed to Kink.com’s purchase of the San Francisco Armory Building for use as a production studio/office location.

Industry labor attorney Michael Fattorosi’s philosophy is that, in a business still largely viewed by the mainstream as somewhat disreputable and illegitimate, observing standard business practices, as well as state and federal regulations, is the best defense against an anti-porn offense.

In an earlier interview with Fattorosi several months ago, he discussed the issue of employee vs. independent contractor. This time around he points out the legal advantages of providing workers’ compensation insurance coverage to employees. He also discusses his thoughts on worst-case scenarios and where the industry is headed.

XBIZ: Explain the basic legalities behind providing workers’ compensation coverage for employees.

Michael Fattorosi: To operate a business here in California is illegal without having workers’ compensation insurance. So, to actually hire someone that is not a family member, or your wife, or a partner or principal in the business — hiring an employee and not providing them work ers’ compensation insurance could be a felony and is definitely a misdemeanor.

You’re also subjected to fines if you’re caught by the Department of Industrial Relations not having workers’ compensation insurance. And you’re subject to what’s called a lockout or a shutdown. They’ll come in and shut down your place of employment until you secure the necessary workers’ compensation insurance and you prove to them that you now have and are covered for work comp injuries.

Once you have workers’ compensation insurance, there’ll be a question as to whether or not this is a covered employee. That’s a different issue. Once you have a policy in effect, what it does then is, if somebody tries to file a workers’ compensation claim, you now have something protecting the employer called ‘exclusive remedy.’

In California, if you don’t have workers’ comp insurance, that employee can then also sue you in civil court where they will be able to recover punitive damages and the exposure on that company will be much higher in civil court than it would be in a workers’ compensation court.

In workers’ compensation court, the employee doesn’t have to show the employer was negligent. If it happens at work, it’s work-related. You don’t have to prove negligence. You don’t have to prove that the employer did something wrong. It could be a simple trip and fall, with nobody at all negligent and that would still be a covered claim.

XBIZ: Should companies expect to pay more for coverage because of the nature of the business? Will there be insurance carriers that don’t want to write policies for adult-oriented businesses?

Fattorosi: Yes. There are brokers that won’t want to deal with it, and there are lines and insurance companies that won’t want to insure for the risk.

But in California, we have the benefit of what’s called State Compensation Insurance Fund, which is a governmental agency that’s quasi-private, quasi-public, which provides insurance as a last resort. So, if you can’t get insurance anywhere else, they have to insure you, if it’s a legal business. Adult video production in California is a legal business according to [the Freeman decision]. So, SCIF has to provide insurance for workers’ compensation for adult companies.

There are risky jobs and you’re going to pay more. Of course, I think, just like anything else, the more safety measures that you have in line for your employees; the less you’re going to pay. Put it this way; you can cover stunt men and stunt women for workers’ compensation. There are extremely dangerous jobs that get covered, so I don’t think it’s a matter of not being able to cover adult performers.

XBIZ: What do you think is preventing the state of California from just going ahead and mounting investigations and auditing people now?

Fattorosi: Time and money.

XBIZ: What do you think it will take for them to start investigating?

Fattorosi: One more HIV outbreak. I imagine, after the last HIV outbreak there was a movement in Sacramento to require condoms, to change testing procedure. And I think with the next HIV outbreak — God forbid if there is one — that depending on the political climate at the time, that will cause people to spring into action about this. And they’re going to look at workers’ compensation, they’re going to look at Cal-OSHA, and they’re going to look at the Department of Industrial Relations.

The reason that I brought this up is because everybody talks about 2257. Everybody talks about obscenity as a way for the government to shut down the industry.

Simply not having workers’ compensation insurance is another way that if George Bush and the Republicans in Washington wanted to call up Arnold Schwarzenegger and the Republicans in Sacramento and exert a little political pressure, [they would] say, ‘We have an inside way of going after these people on a state level.’

XBIZ: The industry has been operating in the same manner for a long time without really having to address these issues. What makes you think that they need to be addressed now?

Fattorosi: I have a lot of experience representing Fortune 500, large corporations — defense contractors, major studios — and when I saw the business practices used in the adult business, I said to myself, ‘There’s a lot of room for education and growth here,’ and [for me to] be able to take this industry from a wild, wild west mentality to a more corporate America mentality.

I think that from a standpoint of sales, from profitability and from growth, that as the industry matures, as it becomes more corporate, it’ll become more widely accepted. When you have a situation where people are buying films or buying video clips, where they believe that the performers are unfairly treated and being demeaned, being abused, and being taken advantage of, you have a smaller base of prospective customers.

When you have a performer that has an attorney, an accountant, her own production company — we can use Jenna Jameson as an example — I don’t believe that anybody believes that Jenna Jameson is an abused, taken-advantage-of performer. I see her as a savvy businesswoman and as almost a mainstream performer. And you feel better about buying into a situation like that as a consumer.

I come at this from an attitude of taking 10 years of experience, in regards to representing major corporations and, trust me, I’ve done the same things with major corporations and told them basically, when you go into court, whether it’s on a workers’ comp issue or whether it’s on a civil issue, you want to be the guy wearing the white hat. Already, from the standpoint of producing adult content, you’re gonna be the villain — so the less villainous you are, the better off you’ll be. So if you do things right, you will 1) have a better time in your business practices, and 2) if you do end up in court, you’ll be a much better defendant than if you didn’t do things properly.

What’s going to happen is that you’re going to end up in front of an audience that doesn’t believe in the wild, wild west mentality. They’re going to be your average citizens and for the most part, while I think that people in California tend to be somewhat progressive — they are also somewhat fair.

XBIZ: Are you afraid people in the industry will question why they need this type of business advice or that you may be perceived as an attorney who is trying to churn up business?

Fattorosi: Again, I like to give my clients legal advice, as well as practical advice. And I know there are a lot of attorneys who don’t like to do that. A lot of attorneys like to give very esoteric, convoluted advice where, when you’re done talking to them, you don’t know any more than you did before you went in there.

I’m not that type of attorney. I come from a blue-collar background. I come from a father that owned a small business, and so I listened to my father’s conversation with attorneys and I saw how he reacted to it. And I’m not trying to create a situation within this industry where I profit. Everything that I’m telling you, if they listen to what I have to say, I won’t profit from it — because this is preventative medicine.

I’m trying to be very careful in posing this issue in that way. ‘The world is going to come to an end!’ The world is not going to come to an end, OK? The industry has been doing it a certain way for so long, and they will continue to do it for a certain way for so long.

But what will end up happening, and this I can almost guarantee, is that at some point, something is going to happen, whether that’s another injury, an HIV outbreak, a special report by a news station, the federal government taking a look at this, a state governmental agency taking a look at this — something is going to happen at some point where there’s going to be more interest in this issue and it could be detrimental for the industry.

This really comes from a sense of trying to protect the industry as opposed to trying to profit from the industry.

Written by Joanne Cachapero

http://www.xbiz.com/articles/80446/fattorosi

When attorney Michael Fattorosi draws a parallel between workers in the adult industry and migrant day laborers, he isn’t comparing pile driving to picking apples — or is he? Because whether an actor suffers a slipped disc while performing on set or a farm worker cracks his head open by falling off a ladder, Fattorosi wants all to know that, as employees, both are entitled to file a claim for workers’ compensation benefits.

An industry lawyer and managing partner at Fattorosi & Chisvin, Fattorosi isn’t the first attorney to comment on the “independent contractor vs. employee” issue for those working in the adult industry.

In June 2004, following the HIV outbreak that caused a two-month, self-imposed industry moratorium, industry lawyer and Free Speech Coalition Chairman Jeffery Douglas was quoted in an article for the San Fernando Valley Business Journal, saying, “The vast majority of the 1,200 people that make a living performing in the movies are not employees, they are independent contractors.”

More recently, attorney Clyde DeWitt was quoted in a September article posted on AVN.com saying, “The greatest temptation for businesses that are new and/or small is to classify employees as independent contractors.” He went on to state that employers “must have workers’ compensation insurance.”

Unlike Douglas or DeWitt, who specialize primarily in 1st Amendment and obscenity law, Fattorosi’s practice is based in labor law, with a specialization in workers’ compensation issues. And while any issue is debatable, particularly amongst lawyers, Fattorosi cites specific case law and other legal references to back up his assessment of adult industry workers as employees.

The debate was brought into sharper focus after the 2004 HIV outbreak in which Evasive Angles and TT Boy Productions were cited and fined $30,560 for noncompliance with Cal/OSHA’s blood-borne pathogens standard. In effect, Cal/OSHA determined the infected performers to be employees and was, therefore, able to fine the companies for failure to comply with pathogen standards, failure to report a serious work-related illness, and failure to prepare a written injury and illness prevention program.

Following the incident, Cal/OSHA established safety standards pertaining specifically to the adult industry. Those standards, posted on the Cal/OSHA website, clearly state “Even workers who are paid as independent contractors may be considered employees under the law. The Division of Labor Standards Enforcement (DLSE) provides guidance for determining whether someone is an independent contractor.”

The DLSE website states that each claim is considered on a case-by-case basis and that “there is no set definition of the term ‘independent contractor.'” However, it also says the “DLSE starts with the presumption that the worker is an employee” and that “the most significant factor to be considered [when determining employee status] is whether the person to whom service is rendered (the employer or principal) has control or the right to control the worker both as to the work done and the manner and means in which it is performed.”

Because production companies and content producers retain what is called “pervasive control over the operation as a whole,” according to Fattorosi, that implies an employer/employee relationship and, as such, the employer is obligated to provide workers’ compensation insurance coverage in the event of a work-related injury or illness.

Fattorosi has been vocal within the industry on the topic; most recently, he has been slated to co-host a talk show, “Breaking the Law,” for Internet station Prime Time Uncensored and has begun posting informational articles and industry news on his law firm’s own website. He sat down for an interview with XBIZ Video. Part 1 examines the concept of employee vs. independent contractor.

XBIZ: Explain the difference between an independent contractor and an employee.

FATTOROSI: For purposes of an article, it is a very complex type of situation. And you’re also looking at different standards for different uses. The IRS may have one standard, the California Department of Industrial Relations may have a different standard, and of course, the civil courts may have yet even a different standard.

We’ll talk about it from a broad standpoint first. If you have the ability to control that particular person that you hire — and what I mean by control is tell them when to show up, where to show up, what to wear; if you provide tools necessary for them to complete whatever you hire them to do, if you require them to take breaks at certain times — this tends to go towards an employer/employee relationship.

The best example I can use is if you needed to paint your home and you decided you’re going to hire a painter. You went to the phone book and you called up Bob the Painter. Bob has an ad, and in that ad Bob is a licensed and bonded painter because part of his profession requires licensing and bonding, which requires him to have a certain standard of care and work and diligence in what he does. It also requires him to have workers’ compensation insurance for his employees. Well, if you call Bob the Painter, he comes out to your house and he asks, “What color do you want to paint the house?” You get to select a color.

Other than that, Bob pretty much does everything. He schedules the job around when he is available. Bob tells you how long it will take. Bob brings his own equipment and his own workers, possibly. And at the end, usually you pay half in front and half at the end when the job is completed to your satisfaction. In that particular situation Bob would be an independent contractor.

Now, if you decided that Bob’s price was too high and you wanted to still paint your house, and you went down to the Home Depot and you bought the paint and the drop cloths, and you bought the scaffolding, the brushes and the paint trays — and then, at the corner next to the Home Depot, there are several day laborers standing there and you decided to hire those day laborers on to come paint your house — they would be considered employees.

Now, if Bob gets hurt while painting your house, Bob can’t file a claim against you because he’s an independent contractor. If one of those day laborers happens to fall off the scaffolding and hurt himself, he can file a claim against your workers’ compensation insurance carrier. Most people don’t realize that every homeowners insurance policy comes with a workers’ compensation rider for household employees.

XBIZ: The adult industry has been operating for a long time without necessarily observing standard business practices or legalities, operating on the premise that performers and crew people are independently contracted. Do you feel the state of California, at this point, recognizes adult performers as employees?

FATTOROSI: You’re assuming that they haven’t up to this point.

XBIZ: Well, it doesn’t really seem like the state is running out to investigate potential violations.

FATTOROSI: California’s a big state and it’s got budgetary limitations and they’ve got a lot of industries in California. A lot of industries are also in the same boat. For a good number of years, migrant farm workers were also treated as independent contractors, or tried to be treated as independent contractors.

I mean, in workers’ compensation law there are a lot of little tiny niches and glitches and ways to look at the law; it would be amazing if most people understood it. Most attorneys don’t understand workers’ comp and certainly most employers don’t, but I’ve been representing [employers] for more than a decade.

I don’t think the state of California looks or has now started looking at this particular industry yet. I know when I was up in Sacramento with the Free Speech Coalition for Lobbying Days, one of the things that I heard often from the legislative aides or the legislators themselves was when was the industry going to start treating the actors and performers in a manner more accustomed to that of an employee?

They didn’t use those specific terms, but they also talked — a couple did mention workers’ comp, some did mention health benefits. So the prevalent attitude in Sacramento is that the industry has to do something for these people and stop making them “throwaway” employees.

California, by nature, has always been a very pro-employee, anti-employer state. Especially with the [mainstream] entertainment business also residing here, no one on that side wants a precedent set on the adult side to be detrimental to their business.

The state of California has gone a long distance in protecting performers — misappropriation of likeness is another where the state Legislature has gone. They protect performers in this state. And when they use the word “performer” or “actor” or “actress,” they don’t have a little footnote that says, “only mainstream.”

So what this industry, I think, has failed to do is to see how it’s done in the mainstream world and try to put into place those standard business practices of the mainstream industry in the adult industry. I think this industry is ignoring the fact that they are employees, not the state of California.

The best way to look at this is there was an HIV outbreak in the industry several years ago. Cal/OSHA came in and they fined those companies for not having the proper procedures in place. And while a Cal/OSHA review is not the same as a workers’ compensation review or a civil court review, it does lead me and probably anyone else in this industry with a background in workers’ compensation to think that all of those actors and actresses involved have valid workers’ compensations claims, because they were basically deemed “employees.”

XBIZ: Is there an advantage to having employees as opposed to independent contractors?

FATTOROSI: You’d rather have the employee be an employee than an independent contractor.

At the end of the day, if they are an independent contractor, that means they can sue you civilly, which will provide a much higher reward than to an employee seeking workers’ compensation. In fact, getting workers’ compensation benefits limits your actors, your stage and crew people to what they can recover. Not having it opens the door for them to sue you civilly.

No employee wants to be considered an employee because it limits the amount of benefits they recover. Everybody would want to be an independent contractor because then you could sue your boss for literally hundreds and thousands of dollars in punitives — pain and suffering, all of that — so you want these people to be employees.

That’s the message that has to get across to the studios, that you don’t want them to be independent contractors. Saying that they’re independent contractors opens you up for a lot higher amount of damage than you would worry about if you were paying workers’ compensation benefits.

In part two of our interview with Michael Fattorosi, he talks about the benefits of workers’ compensation insurance coverage, adult vs. mainstream business models and the potential scenarios that might spur state regulatory agencies into investigative action.