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FAIR Act to Repeal California’s ‘Seven-Year Statute’ Amendment Wins First Committee Vote

AB 983 passed the California Senate's Labor Committee on Wednesday in a 3-1 vote, despite some concerns raised by lawmakers.

The Free Artists From Industry Restrictions (FAIR) Act passed out of the California State Senate’s Labor, Public Employment and Retirement committee on Wednesday (June 22) in Sacramento with a 3-1 vote in favor of the moving the legislation forward.

The Fair Act, also known as AB Bill 983, now moves to the Senate Judiciary committee June 28 for a hearing and a vote.

The vote came after a hearing that lasted more than an hour with the three committee members present peppering the witnesses and the bill’s co-author, Assemblymember Ash Kalra (D- San Jose), with detailed and specific questions about the intricacies of the bill that seeks to repeal a 1987 amendment to California’s “Seven-Year Statute” (a.k.a. California Labor Code Section 2855).

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That amendment allows record labels to sue artists for damages (including potential lost revenue) if they leave after seven years but before delivering the required number of albums in their contract. The Seven-Year Statute, which limits personal services contracts for state residents to seven years, was enacted in 1944 following the judgment in actress Olivia de Havilland’s lawsuit against Warner Bros. Pictures.

Black Music Action Coalition co-founder Willie “Prophet” Stiggers, the lead witness speaking on behalf of the AB 983, compared the 1987 carve-out to “indentured servitude,” adding it “violates the music workers’ right to equal protection” provided all other California employees. “Let me be clear, no label pays an artist money on signing a record contract that has anything to do with what happens eight years later,” he said. “They pay for one album and they own that album. They unilaterally decide whether to invest in more than one album. Labels invest in and own products and records. They do not invest in and should not be allowed to own people.”

He further argued the issue was one of social and racial justice. “Look at the charts. The majority of the artists driving label profits today are people of color…. The heads of the major labels and board members who benefit from those profits are not people of color. The terms of the record contracts are inequitable because the labels have all the power. The FAIR act won’t change the erroneous terms of those contracts, but it will make the artists like every other Californian worker, [who] can escape those inequitable terms after seven years.”

Speaking for the opposition were David Blackburn, Nera Economic Consulting, and Julian Petty, Warner Records executive vp, head of business and legal affairs, who stressed his role as an artists lawyer before joining Warner Records in 2019. Petty argued that passing AB 983 would “destroy the foundation of California’s music business and harm the next generation of artists by transferring royalties and investments they need to wealthy, successful artists who don’t.”

He added that artists have the right to terminate a contract after seven years now, but that AB 983 would “eliminate the label’s right under the statute to seek damages when an artist terminates their agreement but hasn’t delivered promised recordings. It would deprive the labels of the same basic right to seek damages as any party of a contract has when the other side just doesn’t hold up their end of the bargain. Making this a one-sided change would hang a cloud of uncertainty over every recording agreement in our state. Fewer artists would be signed in California and those signed would receive lower royalties, advances and other investments.”

At the suggestion of the Labor committee members, including committee chair Dave Cortese (D-San Jose) who seemed concerned about the bill interfering too much with issues they felt should be remedied under regular contract law, AB 983 no longer includes a section added into its previous iteration, AB 2926, that dealt with label renegotiations and various criteria that must be met if a new seven-year contract begins. Added to the new bill is a clause that states in addition to an artist giving their label written notice about their intent to leave after seven years, they must pay back unrecouped advances, which would be credited back to the artist’s royalty account.

Petty claimed paying back the unrecouped advances was a “drop in the bucket in terms of making record labels whole and the bill would still bar recovery of label investment that don’t take the form of cash advances like marketing and promotion.”

Many of the senators’ questions focused on how the record business works, including the consolidation from six to three major music companies since the amendment passed 35 years ago, and the proliferation of other paths for artists to release music. Petty revealed that Warner Records signs between 25 and 40 acts per year, usually for an initial period with one album with three options for additional albums. He said that nearly half of the deals signed in 2021 were licensing deals with advances ranging from “a hundred thousand dollars to millions and millions of dollars.”

Kalra agreed that while much has changed, “we put the thumb on the scales 35 years ago when we exempted musicians and artists that were signed from the Seven-Year Statute… if [artists] get to the end of their seven years, as opposed to any other seven-year statute [for] any other service contract in the state, the label can say… you have one more album to do and there’s a dispute, maybe creative differences, it goes to eight, nine, maybe 10 years, and they can just sit on it. And now that artist is trapped.”

Sen. John Laird (D-Santa Cruz), who is also on the Judiciary committee, asked why the bill broadly included all artists, as opposed to only the smaller acts who could, presumably, be most hurt by the 1987 amendment.

“The fact that there is an exemption is an injustice,” Kalra argued. “There’s no reason to have an exemption whether someone is a megastar or is just dabbling and trying to make it in the industry.”

Laird, although he felt there were “flaws that you really need to address in [the bill],” nevertheless, like Cortese, voted for the bill to move to Judiciary. Sen. Josh Newman (D-Fullerton) voted no, while Maria Elena Durazo (D-Los Angeles), who was not present for the hearing, voted yes. Kalra recognized that more work needs be done on the bill to “figure out how both sides are made whole because right now that’s not happening.”

The California Music Coalition, who along with the RIAA, opposes the bill, released a statement following the hearing, that read in part, “Detailed testimony at the Labor Committee today from a top music industry executive and experienced economic expert established beyond doubt that AB 983 would hurt working artists in California and make it harder for new acts to get signed….We appreciate Senator Laird’s observation that there remain ‘lots of unresolved issues in the midst of this’ and the recognition by Chairman Cortese as well as Senator Laird that the bill ‘still needs a lot more work’ to prevent a reverse wealth transfer away from developing and working artists to the wealthiest and most successful. We look forward to continuing to make the case against this flawed proposal before the Judiciary Committee – with its traditional focus on contractual fairness.”

In a statement to Billboard, Kalra said, “Today’s discussion and vote in Senate Labor Committee was encouraging as we look to extend existing labor protections to recording artists. I am optimistic the artists and labels can find a path forward that frees the artists of their contacts after seven years while ensuring labels are reasonably made whole for their investments in talent. We look forward to continue working with stakeholders ahead of the next policy committee.”

The CA Fair Act Coalition, a collective that includes the Music Artists Coalition, the Black Music Action Coalition, Future of Music Coalition, Songwriters of North America and SAG-AFTRA, that supports the AB 983 has not yet issued a statement.

While most artists have either been dropped or renegotiated their contracts for better terms before the seven years is up, a number of acts, including the Eagles and Metallica, have sued to be dismissed citing the seven-year statute. On June 16, H.E.R. invoked the seven-year-statute in a suit against her longtime record label, MBK Entertainment.