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Trouble in Hobbiton

You might have seen some articles in U.S. newspapers last week about the filming of the two Hobbit films in New Zealand.  Director Peter Jackson always intended to make The Lord of the Rings prequels there, but some recent activities of an actors union appeared to have thrown this into doubt and led to a major debate in New Zealand: Are changes to employment laws needed?  Should they be changed to seemingly suit movie executives so that New Zealand remains an attractive filming destination?  To what extent should other incentives be offered to lure major productions to the country?

The movie industry may appear to be full of people making lots of money, but that’s not the case for everyone (I got paid about NZ$12 an hour as an extra in The Lord of the Rings trilogy – which worked out to a lot less once agency fees and taxes were taken out).  The issue in this situation wasn’t that the big stars weren’t getting paid enough, it was about extras and others with small parts trying to seek a better deal through collective action.  They basically wanted to have a collective employment agreement that guaranteed minimum wages and conditions.  They saw that the alternative was individual contractual arrangements that didn’t allow for employee entitlements to things like sick leave and holiday pay and protections relating to unfair dismissal.  The studio wasn’t particularly interested in discussing a collective agreement, which led to the union calling for a boycott of The Hobbit films by their members and other unions around the world.

The issue comes back to the definition (and legal consequences) of being an “employee” rather than an independent contractor under the Employment Relations Act 2000.  For example, employees can unionize and have collective agreements and have certain minimum entitlements and courses of action to resolve disputes, whereas independent contractors are subject to whatever terms are set out in their individual contracts.

The question of whether someone is one or the other is not that simple, however, since the Employment Relations Act says that “the real nature of the relationship” must be looked at to determine whether someone is an employee or not –  it doesn’t just depend on someone being called an independent contractor.  This issue was the subject of a case brought by a model maker for The Lord of the Rings trilogy who brought a personal grievance action claiming he had been unfairly dismissed by the special effects company that he worked for, Three Foot Six Ltd.  He argued that, despite the wording of his contract that indicated he was an independent contractor, he was actually an employee according to the definition in the Employment Relations Act and therefore was entitled to challenge his dismissal.  The case went all the way to the Supreme Court, which restored a previous decision of the Employment Court that the circumstances demonstrated the existence of an employment relationship – he had received training for the position and therefore couldn’t be said to be contracting out his special skills, he worked regular hours and was treated as an employee, his work was closely controlled by the company, and there was no evidence that he was operating as a separate business entity.

The fact that film workers will generally be independent contractors in New Zealand is quite attractive to film studios, but this court decision was seen as highlighting the potential uncertainty and scope for litigation by workers (although the Employment Court judge had emphasized that her decision was based solely on the individual’s circumstances and was not to be regarded as affecting the status of other film industry workers).

In the end, Hollywood studio executives flew into the capital and met with the Prime Minister and other senior Ministers to talk about the uncertainty and the union dispute.  By this stage, there was considerable interest in the situation, with many people (including the government) hoping that The Hobbit would still be filmed in New Zealand, bringing jobs and revenue and a further boost to tourism.  The outcome of the meeting was that (a) amending legislation would be passed immediately to specifically exclude film workers from the definition of employee, (b) changes would be made to tax provisions that would allow the studios to collect additional rebates totalling US$7.5 million, and (c) the government would invest US$10 million in a joint marketing campaign for the films as part of a “strategic partnership” to publicize New Zealand.

The legislation was passed on Friday (New Zealand time) amidst much debate.  Some people thought that the studios were just posturing and weren’t actually going to take the filming to Eastern Europe as had been suggested, and therefore that the government had been duped into giving them a better deal.  Some also thought that the government had “sold-out” and subjected New Zealand’s democratic processes and legislation to pressure from a multinational corporation, particularly since the bill was passed quickly and without any public involvement.  On the other hand, some thought that the actors had been wrong to call for the boycott, which they saw as risking New Zealand’s international reputation as a good place to make movies, and that the government had acted in the best interests of the country in reaching the deal.

The result?  Two multi-million dollar movies being filmed in New Zealand that are expected to be released in 2012 and 2013.  And no doubt an ongoing debate that demonstrates different political and economic ideologies and the significance of the growing film industry in New Zealand.

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