Can a Texas talent agency follow Screen Actors Guild fee rules without breaking the Talent Agency Act?

Texas AG Opinion DM-0060: Talent Agencies, SAG Franchise Rules, and Fee Splitting

Plain-English summary

The Department of Licensing and Regulation asked whether a Texas talent agency franchised by the Screen Actors Guild would break the Texas Talent Agency Act by following amendments to the Guild's franchise rules (Rule 16(g)). As the department described the amendments, the Guild treated all talent represented by a franchised agent as Guild members and required an agency that represented non-union talent to non-union producers to forfeit all its fees and commissions to the union. Because the Attorney General does not interpret contracts in the opinion process, the opinion took the department's description of the rule as given and asked only whether following such a rule would violate sections 2(b), 2(c), or 10(b) of the act. The conclusion: it would not.

The act was passed in 1989 to protect artists (actors, musicians, directors, writers, and others) from unregulated "fly by night" talent agencies, mainly by requiring agencies to register with the department and post bonds, and by banning certain practices. On section 2(b), which bars charging artists registration or advance fees and forcing them to use particular services, the opinion found the Guild amendments did not touch that provision at all.

Section 2(c) was the close question. It bars a talent agency from splitting or sharing fees "with a person who is not registered under this Act," and the opinion agreed that forfeiting commissions to the Guild could count as fee sharing. On the statute's face, that would bar forfeiting fees to the Guild, which is not registered as a talent agency. But the department's own regulation read section 2(c) more narrowly, to bar splitting fees only with a person "who is required to be but is not registered" as a talent agency, and it exempted unions whose efforts to get work for members are casual at most. Since the Guild does not obtain employment for its members, it was not required to register, so the regulation did not bar forfeiting fees to it. The opinion then tested whether that narrowing regulation was valid, applying the rule that an agency regulation is valid if it harmonizes with the statute's general objectives (Gerst v. Oak Cliff Sav. & Loan Ass'n). It held the regulation valid because the act was not meant to regulate entities that do not obtain employment for artists, so section 2(c) did not prohibit forfeiting fees to the Guild.

On section 10(b), which requires an agency to deposit funds it receives "on behalf of an artist" in an insured account and disburse them only as the rules allow, the opinion concluded the provision governs an artist's money, not the agency's own commission after the artist has been fully paid. So forfeiting the agency's own retained commission to the Guild, after the artist was paid in full, did not violate section 10(b).

Currency note

This opinion was issued in 1991. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. The Texas Talent Agency Act (article 5221a-9, V.T.C.S.) and its administrative rules have been amended and recodified since 1991, so the section numbers here may no longer correspond to current law. Verify current statutes and rules before relying on anything here.

Common questions

Did the Talent Agency Act bar a Texas agency from forfeiting commissions to the Screen Actors Guild?
Under this 1991 opinion, no. The opinion read the fee-splitting ban in section 2(c), as narrowed by the department's regulation, to reach only persons required to register as talent agents. Because the Guild did not obtain employment for its members and so was not required to register, forfeiting fees to it was not prohibited.

Why did the department's regulation control the outcome?
The opinion presumed the regulation valid because an agency's reading of a statute it administers is upheld if it harmonizes with the statute's general objectives. Since the act aimed to make talent agencies register and protect artists, not to regulate entities that do not place artists in work, narrowing section 2(c) to required registrants did not conflict with the act.

Did the trust-account rule (section 10(b)) block the forfeiture?
No. The opinion read section 10(b) to govern how an agency holds and disburses an artist's money, not what it does with its own commission after the artist has been fully paid.

Did the opinion decide whether the Guild's rule was legal under antitrust or right-to-work law?
No. The opinion noted those arguments were raised by private parties and said the opinion process addresses questions from authorized public requestors about public duties, so it confined itself to the Talent Agency Act.

Background and statutory framework

The Texas Talent Agency Act, article 5221a-9, V.T.C.S., was adopted in 1989 (S.B. 759). Before 1979 talent agencies were regulated as employment agencies under article 5221a-6, V.T.C.S.; a 1979 rewrite dropped talent and modeling agents, leaving the industry unregulated until the 1989 act. The act requires talent agents to register with the Department of Licensing and Regulation and post surety bonds (§§ 2, 5), bans operating without a certificate, charging artists registration or advance fees, and splitting fees with unregistered persons (§ 2), restricts handling of artists' funds and requires written contracts (§§ 10(b), 12), and gives the department rulemaking authority (§ 3(a)(3)). Enforcement runs through voiding noncompliant contracts (§ 13(a)), treating violations as deceptive trade practices under Business and Commerce Code chapter 17 (§ 13(b)), injunctive actions (§ 14), and Class A misdemeanor liability (§ 15; Penal Code § 12.21). The department's rules appear at 16 T.A.C. §§ 78.10, 78.30(b), 78.72, and 78.76(b). The validity standard came from Gerst v. Oak Cliff Sav. & Loan Ass'n. The opinion also cited Texas Constitution article IV, section 22 and Government Code section 402.042(a) on the scope of the opinion process.

Citations

Constitutional, statutory, and regulatory provisions:

• V.T.C.S. art. 5221a-9, § 2(b) (no registration or advance fees; no forced use of specified services)
• V.T.C.S. art. 5221a-9, § 2(c) (no fee splitting with a person not registered under the act)
• V.T.C.S. art. 5221a-9, § 10(b) (trust-account handling of funds received on behalf of an artist)
• V.T.C.S. art. 5221a-9, § 13 (void contracts; deceptive trade practice remedies)
• V.T.C.S. art. 5221a-6 (former employment-agency regulation)
• Penal Code § 12.21 (Class A misdemeanor)
• Gov't Code § 402.042(a) and Tex. Const. art. IV, § 22 (scope of the opinion process)
• 16 T.A.C. § 78.76(b) (narrowing fee-splitting ban to required registrants)
• 16 T.A.C. § 78.72 (disbursement of artist funds)

Cases:

• Gerst v. Oak Cliff Sav. & Loan Ass'n, 432 S.W.2d 702 (Tex. 1968)

Session laws referenced: S.B. 759, Acts 1989, 71st Leg., ch. 202; Acts 1989, 71st Leg., ch. 1039, § 6.03.

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/dan-morales/dm-0060
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1991/dm0060.pdf

Original opinion text

Best-effort transcription from a scanned PDF. Minor errors may remain — the linked PDF is authoritative.

Office of the Attorney General
State of Texas

DAN MORALES
Attorney General

November 27, 1991

Mr. Larry E. Kosta
Executive Director
Department of Licensing and Regulation
P.O. Box 12157
Austin, Texas 78711

Opinion No. DM-60

Re: Whether a talent agency that follows certain amendments to Screen Actors Guild franchise regulations would violate the Texas Talent Agency Act, article 5221a-9, V.T.C.S. (RQ-146)

Dear Mr. Kosta:

You have asked whether a Texas talent agency franchised by the Screen Actors Guild[1] would 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 in Texas.[2] Your letter summarizes the effect of the 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 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 of Rule 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 'fly by night' operations . . . infiltrated the industry and [were taking] advantage of the consumer." Id. Clearly, the purpose of the act was to remedy this situation by regulating the industry. Id.

Significantly, it is evident from the bill analysis that the act was enacted to protect consumers, i.e. the artists[5] who use talent agencies to obtain employment, rather than talent agencies themselves. That the primary purpose of the act is to protect artists is also 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 also V.T.C.S. art. 5221a-9, §§ 2, 5. The act also sets forth certain prohibited conduct, including operating a talent agency without a certificate of registration, 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, § 2. In addition, the act provides certain specific protections for artists, including restricting the manner in which talent agencies handle funds on behalf of artists and requiring that talent agencies provide artists with complete, written contracts. Id. §§ 10(b), 12. The department is vested with rulemaking authority to implement the act. Id. § 3(a)(3).

The act contains several enforcement provisions. First, a contract that does not comply with the act is void and unenforceable. Id. § 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. § 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 Class A misdemeanor. Id. § 15; see also Penal Code § 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) of the act. We examine each of these provisions in turn. Section 2(b) of the act provides:

A talent agency may not charge, as a condition of registering any applicant or representing any artist, a registration or 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 specific publication, video or audio tapes, post card service, advertisement service, resume service, photographer, or acting or modeling school or workshop.

Section 2(c) of the act provides:

A talent agency may not split or share fees with a person who is not registered under this Act.

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 in violation of section 2(c). Given the broad language of this provision, we agree that forfeiting fees to a third person could constitute splitting or sharing fees under the act. Thus, on the face of the act, it would appear that section 2(c) would prohibit talent agents from forfeiting fees to the Screen Actors Guild since the Screen Actors Guild is not registered as a talent agency under 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: "A talent agency may not split or share fees with any person who is required to be but is not registered under the Act as a talent agency." 16 T.A.C. § 78.76(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 in nature only," and exempts such unions from the requirements and prohibitions of the act. Id. § 78.30(b) ("Exemptions"). In their brief, the Texas talent agencies concede that the Screen Actors Guild does not obtain or attempt to obtain employment for its members.[7] 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 is an apparent inconsistency between the act and the department's regulations. Section 2(c) of the act prohibits talent agencies from splitting or sharing fees with any person who is not registered under the act. The act defines the term "person" broadly to mean "an individual, corporation, organization, business trust, estate, trust, partnership, association, or any other private legal entity." V.T.C.S. art. 5221a-9, § 1(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 "any person who is required to be but is not registered under the act as a talent agency." Thus, while the act would prohibit talent agencies from splitting fees with any nonregistered person, the regulations apparently would permit talent agencies to split fees with persons who are not registered under the act but are not required to register.

Generally, regulations interpreting a legislative provision promulgated by an agency with the authority to implement the provision are presumed valid, see 2 Tex. Jur. 3d Administrative Law §§ 18, 85 (1979), and are regarded as having the force and effect of law, id. § 19. An order which exceeds an agency's authority, however, is invalid. Id. § 16 at 209. Given the apparent inconsistency between section 2(c) of the act and section 78.76(b) of title 16 of 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 is whether the regulation is in harmony with the general objectives of the statute. Gerst v. Oak Cliff Sav. & Loan 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 of the 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, we believe that this is not problematic because the act is simply not intended to regulate the conduct of persons who do not obtain employment for artists. We believe that the department did not exceed its authority in enacting this regulation and that it is valid. On this basis, we conclude 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) of the act. Section 10(b) of the act provides:

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 as prescribed by department rule.

The department regulations set forth the length of time within which talent agencies must disburse such funds to artists and the records they must maintain with respect to such funds. 16 T.A.C. § 78.72. Apparently, your concern is that forfeiture of fees by the talent agencies to the Screen Actors Guild would run afoul of this 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 not 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 Actors Guild after it had properly disbursed to the artist all funds to which he or she is entitled.

SUMMARY

Talent agencies would not violate sections 2(b), 2(c), or 10(b) of the 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 of Licensing and Regulation.

Very truly yours,

DAN MORALES
Attorney General of Texas

WILL PRYOR
First Assistant Attorney General

MARY KELLER
Deputy Assistant Attorney General

JUDGE ZOLLIE STEAKLEY (Ret.)
Special Assistant Attorney General

RENEA HICKS
Special Assistant Attorney General

MADELEINE B. JOHNSON
Chair, Opinion Committee

Prepared by Mary R. Crouter
Assistant Attorney General

[1] The Screen Actors Guild is a national union which represents performers in the motion picture and television industry.

[2] Talent agencies represent performers, placing them in performing employment for a fee. The Screen Actors Guild attempts to regulate talent agencies by franchising them. The Association of Talent Agents and the National Association of Talent Representatives are trade organizations which represent a large number of franchised talent agencies throughout the country.

[3] We also note that the briefs submitted by counsel for the Screen Actors Guild and various Texas talent agencies address at great length the legality of the amendments to Rule 16(g) under Texas' antitrust and right to work statutes. The purpose of the opinion process is to address questions affecting the public interest or concerning the official duties of governmental officials posed by specific, statutorily-authorized requestors, not to address questions posed by private parties. See Tex. Const. art. IV, § 22; Gov't Code § 402.042(a). Because your request seeks an opinion only with respect to the Texas Talent Agency Act, we must confine our analysis to that provision.

[4] S.B. 759, Acts 1989, 71st Leg., ch. 202, at 869.

[5] We use the term "artist" as it is defined in the Texas Talent Agency Act to include actors, musicians, directors, writers, and other professionals in the entertainment industry. See V.T.C.S. art. 5221a-9, § 1(1); see also 16 T.A.C. § 78.10.

[6] Although the act refers to the Department of Labor and Standards, the name of the agency was changed to the Department of Licensing and Regulation in 1989. See Acts 1989, 71st Leg., ch. 1039, § 6.03, at 4231.

[7] In their briefs, the Texas talent agencies contend that this regulation does not exempt the Screen Actors Guild from the prohibitions of section 2(c) because the Screen Actors Guild does not attempt to obtain employment for its members in any respect. They contend that the regulation exempts only unions which casually attempt to obtain work for their members. We find this interpretation of the regulations unpersuasive. Clearly, the regulations are intended to exclude all entities which do not obtain or do not attempt to obtain employment for artists from the requirements of the act. This regulation merely clarifies that unions which casually attempt to obtain employment for their members are also exempt. The regulation is clearly not intended to exclude unions which never engage in such activities from the exemption.