                            QBfficeof tty Bttornep Q&nerd
                                          Qtate of lltexae
DAN MORALES                                November 27,lWl
 .ATTORNEY
       GENERAL
      Mr. Larry E. Kosta                                 Opinion No. DM-60
      Executive Director
      Department of LicensingandRegulation                Re: Whether a talent agency that
      P. 0. I3ox 12157                                   .follows certain amendments to Screen
      Austin Texas 78711                                  Actors Guild franchise regulations
                                                          would violate the Texas Talent Agency
                                                          Act, article SUla-9, V.T.C.S.
                                                         (N-146)


      Dear Mr. Kosta:

              You have asked whether a Texas talent agency franchised by the Screen
      Actors Guild1 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



             ‘TIE Screen Actors Guild is a aational union which nprcsents     performers   in the motion
     pichuc and television industry.

             %ent     age&es represent performcr~ plaeiq them in performing employment for a fee. The.
     Scxeeo Actors Guild attempts to regulate talent agencies by frahisiog      them. The Association of
     Talent Agents and the National Association of Talent Representatives arc trade organizations which
     represent a large number of franchised talent agencies throughout the country.




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Mr. Larry Kosta - Page 2                  (DM-60)




           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 ffly by night’ opera-
tions . . . 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.




          !We also note that the briefs submitted by counsel for the Sczen 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 off~c@ duties of governmental o&ials posed by specitic,
statutorily-authorized reqwstors, not to address questioos posed by private parties. See Ten Coast.
art. IV, 5 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.

        4S.B. 159, Acts 1989,71st Leg., ch. 202, at 869.




                                          p.   300
.   ,


        Mr. Larry Kosta - Page 3                 (DM-60)




                 Significantly, it is evident from the bill analysis that the act was enacted to
        protect consumers, ie. the artists5 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 &so V.T.C.S. art. 5221a-9, 85 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, B 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
        $6 10(b), 12. The department is vested with rulemaking authority to implement the
        act. Id 9 3(a)(3).

               The act contains several enforcement provisions. First, a contract that does
        not comply with the act is void and unenforceable. Id P 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 5 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 aLro Penal Code 5 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


                3We use the term “artist”as it is detined in the Texas Talent Agency Act to include adors,
        musicians, directors, writers, and other professionals in the entertainment industry. See V.T.C.S. art.
        SZ?la-9, % l(1); see also 16 TA.C. 0 78.10.

                %khougb 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.




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Mr. Larry Kosta - Page 4           (DM-60)




          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
specitic,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 promul-
gated pursuant to the act interpret section 2(c) as follows: “A talent agency may not
split or share fees with any person who k required to be but is not ~registeredunder the
Act as a talent agency.” 16 T.A.C. 5 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 m nature only,” and exempts such unions from the
requirements and prohibitions of the act. Id g 7830(b) (“Exemptions”). In their
briec the Texas talent agencies concede that the Screen Actors Guild does not




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obtain or attempt to obtain employment for its members.’ 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, 3 l(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 Admin~adve Law $9 18, 85 (1979), and are regarded as having the force
and effect of law, id 0 19. An order which exceeds an agency’s authority, however,
is invalid. Id 0 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 witlr the general objectives of the

         ‘In their briefs, the Texas talent agencies contend that this regulation doea 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 onfy unions which casually attempt to obtain work for their members.             We fmd this
interpretation of tbe regulations unpersuasive. Clearly, the regulations are intended to exclude n/l
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. Tbe regulation is clearly nof intended to exclude unions which
never engage in such activities from the exemption.




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Mr. Larry Kosta - Page 6           (DM-60)




statute. Gerst v. Oak Cliff Sav. & ban 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. 9 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 nor 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


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Mr. Larry Kosta - Page 7             (DM-60)




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.




                                                  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




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