Our Hobbit Overlords

October 29th, 2010 by Dylan Leave a reply »

There’s so much about the recent Hobbit crisis that’s had me yelling at the TV, radio and computer…

Let’s start, briefly, with the whole union thing. I really paid very little attention to the entire thing until near after the union claimed to have dropped their boycott – they said they had, the producers said they hadn’t. I didn’t really understand the dispute before that because nothing anyone said about it really explained much. So I looked into it.

The timing is confusing, but broadly is seems that the MEAA (the Australian union that is the parent of NZ Equity) initiated action with the FIA (Internation Federation of Actors) to have all affiliated unions issue “do not work” orders against The Hobbit. The studio and producers claim to have first heard about this in a letter dated August 17th. NZ Equity first met with their members about the issue on September 28th.

From the very outset of the issue in public Peter Jackson made it clear that they believed that NZ law prevented collective bargaining with independent contractors (the Crown Law office later confirmed this). While the public faces of NZ Equity claimed they “just want to talk” – a claim which is cast into doubt when you consider the wording of the notice from MEAA to all FIA members

no member of any FIA affiliate will agree to act in the theatrical film The Hobbit
until such time as the producer has entered into a collective bargaining agreement with the Media
Entertainment and Arts Alliance

Peter Jackson maintained that he was also not the person to talk to as the demands Equity was making were industry-wide and he was not in a position to negotiate on behalf on the whole industry.

In New Zealand workers in the film industry generally work as contractors and under guidelines outlined in a couple of colourful books – The Pink Book and The Blue Book – they cover actors and crew respectively. They are drafted by involved unions and SPADA (the Screen Production and Development Alliance) and serves as the basis on which the majority of film and televisions are operated.

Given that a collective agreement with independent contractors was deemed illegal, it seemed that what Equity really wanted to do was re-negotiate the Pink Book. And it transpired that SPADA had actually been trying to meet with Equity/MEAA about the Pink Book for around 18-months.

From the very beginning of the public spat the studio made it very clear that industrial action would impact their confidence in NZ a shooting location, stating that it was their general policy to avoid locations where “there is a potential for work force uncertainty or other forms of instability“.

Fast forward almost a month and Warner Brothers executives were flying to NZ to make a final decision on whether they considered New Zealand a stable enough location to film, and whether the numbers added up. At this point the argument became whether the union action was to blame to the potential loss of The Hobbit. The union position was that it was entirely a money decision, if they were going elsewhere it’s because they wanted to save money, the alternative position, and the one I think was more accurate, was the if a money decision was being made now it was only as a result of the strike action.

The movie execs met with the government. The government said they couldn’t offer larger tax incentives. But they did (sort of). In the end Warners came away with a $15m grant toward the costs of production, a $10m marketing investment and the existing 15% tax rebate (which was also extended to cover some things it wouldn’t have originally). By some estimates this has a total value of around $100 million, which I think is very high (it assumes a 15% rebate of $550 million taxable spending, but not all spending is eligible for the rebate).

This has led to statements like this: “the total bill to taxpayers for the movies to almost $100m” – which is very inaccurate. As far as I can see the only actual outgoing from the government is the grant (US$15m) and the marketing costs (US$10m), about NZ$33 million in total. The remainder is tax rebates – a discount on tax payments. The actual tax rates on that expenditure is definitely more than 15% so in th end the direct tax take is more than the rebate.

If the film had been taken offshore then we’d not be spending $33m but we’d also not be earning any tax income. And the thousands of people who will be employed in the production of the films would not have that work, and wouldn’t be paying tax on their income from the film, or spending it.

However, had the union not taken the action they did then pre-production would have continued as it had been. The government wouldn’t have had to spend $33m in grants, and they wouldn’t have felt compelled to extent the eligibility of the tax rebates to the tune of $20m.

As I see it, three options existed basically:
– No union action, production continues here. Only ‘cost’ to NZ would be existing limited tax rebate. Large financial gain.
– Production leaves NZ. Cost to NZ is $0. Also no direct income.
– Government offers more. “Cost” to NZ? Who knows, but at least $53m less. Large financial gain.

By my reckoning then the union’s poorly considered action has actually cost the NZ taxpayer (as in expenditure or loss of income that didn’t exist prior to the industrial action) more than $50 million.

The Legislation

Probably the biggest issue with the deal that was made by the government to secure the film’s production was the introduction of new legislation around the employment status of contractors in the film industry.

In practice what the legislation does is modify a clause in the Employment Relations Act that defines an employee. It adds a specific exclusion for contractors in the film (and video game) industry.

Why? In 2001 a model maker named Jame Bryson took Three Foot Six (the Lord Of The Rings production company) to court after being made redundant. He had been a model maker employed as an independent contractor but felt he’d had an employee relationship, and the courts agreed, saying that the conditions of his work with the company had been that of an employee. He was subsequently awarded compensation as well as redundancy payments and holiday pay.

The concern then being that a contractor employed on a long term project may be able to claim later that they had an employee relationship with the company, and subsequently be entitled to various benefits of such.

However Bryson’s case is not typical – it seemed he wasn’t initially presented with a written contract and in many ways was treated as an employee.

In the film industry almost every worker is a contractor from producers to cablers. The nature of the industry is very project-based and there are a variety of stages within the project, it’s not generally conducive to an employee relationship. For these contractors nothing changes with this legislation – their contracts are not changed in any way at all. They would have been employed as contractors before the law change and will continue to be afterward.

The legislation has no practical impact at all. The only change is that now there is probably no opportunity for any of those contractor to later claim in a court that their employment relationship was that of an employee.

But still people, including an opposition MP, are claiming that the legislation is an assault on the rights of employees. I believe this is completely misrepresenting the legislatio
n. It’s a lie. No rights have been eroded, unless you consider the right of a contractor to unilaterally try to redefine the employment relationship to be a right.

However there is a bigger issue with this legislation – actually a couple – it is a law that has been passed very overtly to satisfy a company. This is not a good precedent.

But is it uncommon? I don’t think so – I believe a lot of laws are probably influenced by special interests, including businesses. But it’s not usually so obvious or immediate.

The other issues I have are that Video Game workers are included, and strangely Television workers are specifically excluded. I think that the law needs better defined for all contractors, not just those in Film. Ideally all contractors should be defined as just that, with some protections for contractors.