|
Most record
companies require that the recording artist render its services to the
record label pursuant to a "work made for hire" provision.
Under the work made for hire doctrine of the U.S. copyright law, the
record label can retain ownership of an artist's master recordings and
thus insure maximum profits for the label. However, the legal
ramifications of these unusual work made for hire arrangements could
ultimately be disastrous for the record industry. Most labels could be
liable under the Federal Fair Labor Standards Act and State labor laws
since the artists who create works made for hire could be deemed
employees for the purposes of workers' compensation benefits and minimum
wage guarantees as well as unemployment and disability insurance. There
may also be grounds for an artist-employee to terminate existing
contracts.
Under the U.S. copyright law, as amended by the Sound Recording Act of
1971, a copyright is granted in a sound recording separate and apart
from the copyright granted in the underlying song. Copyright ownership
vests in the person who actually creates or writes a given work of
authorship the moment the expression is "fixed in a tangible
medium". In the case of a songwriter that would be when the song is
written down or recorded; in the case of a recording artist that would
be when the master is recorded by the artist. If the work is created as
a "work made for hire", however, then the company who hires or
employs the artist is the author of the work and owns all rights in the
work for copyright purposes.
Record contracts are structured as ongoing recording commitments where
the label agrees to pay for the production of one album with options to
require additional albums from the artist at their discretion. The
record label pays an advance to the artist for the cost of producing the
album and the artist then records and delivers the album to the record
label on a work made for hire basis. The record company agrees to pay
the artist a royalty on any sales of the album based on an extremely
complex calculation involving numerous variables (subject to recoupment
of any and all advances from the artist's royalty).
The dilemma for the artist is that, although the artist pays for the
cost of producing an album, the record company owns the album as an
asset and, since most of the advance is used to pay for recording costs,
the artist ends up with very little money in his or her pocket. Since
the record label can cross-collateralize unrecouped advances from one
album against royalties payable from any other album, the artist could
conceivably sell a great many albums and still be in an unrecouped
position with its record label - and while the artist remains in an
unrecouped position, the record company is making a profit on each album
sold.
Record labels justify this system on the basis that it protects them
from the high number of flops that occur. To be fair, it is a high
stakes business and record labels do frequently end up with albums that
do not sell. However, the system clearly works much better for the major
labels than it does for the artist.
That is where the labor laws come into play. Under the "economic
realities" test applied by the courts in some employment cases, the
artist could be deemed an employee rather than an independent
contractor. The artist's record contract probably contains provisions
which provide that the label has the right to control the nature and
quality of the artist's work, to control the recording sessions, and to
accept or reject delivered recordings. The label almost always has the
contractual right to exercise discretion over the artist's repertoire
and recordings, and can require the artist to stop recording or to
re-record any track to suit the label's demands. Furthermore, almost all
significant recording contracts are exclusive service agreements such
that the label controls the sole right to the artist's output during the
term of the agreement. All of these factors weigh in favor of a finding
by the courts that the artist is the record company's employee under the
Federal Fair Labor Standards Act and State labor laws.
In the event that an artist were held to be the record label's employee,
the artist would have a right to make a claim for worker's compensation
benefits for job related injuries, and even disability coverage. An
artist whose option is not exercised by its label could claim that he or
she was fired and that this entitles them to unemployment insurance
benefits, or an artist could have a right to claim minimum wage
guarantees during the term of employment with the record label under the
artist's record contract.
A record label's failure to provide the appropriate employment benefits
and wage payments could be grounds for the artist to terminate the
recording contract. In additional to demanding the return of the
artist's master recordings, the artist might also try to collect money
damages. Record labels would be well advised to take a closer look at
the onerous provisions of their agreements since the artist/label
employee/employer scenario could mean an enormous windfall for recording
artists but financial disaster for the record industry.
--------------------------------------------------------------------------------
Wallace Collins is a New York attorney specializing in entertainment and
intellectual property law. He was a recording artist for Epic Records
before attending Fordham Law School.
|
