Generally, state law allows a child under 18 the unilateral right to discontinue rendering services under a performance contract to which he or she is a party, even if an adult would be bound by the same contract. One drawback of this doctrine is the reluctance of entertainment companies to enter into agreements with minors which require large commitments of capital, out of fear that they will be unable to enforce their rights and will lose their investments. Some states have addressed this concern with statutory or court-made laws that provide for judicial ratification of a contract (subject to certain standards) which prohibits the minor from disaffirming the agreement on the basis of his or her minority. The benefits to the entertainment company are obvious, but there are also benefits to the minor, who can negotiate better terms than he or she might otherwise have been able to.
In addition, some jurisdictions provide a further benefit to the minor by requiring that a portion of the minor’s income be set aside in a trust fund until he or she reaches majority. Some also have specific rules to assure that the minor’s educational needs are met. Although we have found when submitting these agreements for judicial ratification in New York that courts typically impose the same requirements, until now New York has had no specific statutory requirement in this regard (as opposed to a general expectation that a guardian must safeguard the minor’s assets and see to his or her education).
This changed on September 30, when Governor Pataki signed the New York “Child Performer Education and Trust Act of 2003,” which is effective in March 2004. The act requires that 15% of the under-age performer’s gross earnings be set aside in a trust account (an UTMA account) until he or she turns 18 (under the Act, where the minor is employed in the music industry, “gross earnings” includes advances but excludes “deductions to offset those advances or other expenses incurred by the employer pursuant to the contract”). This requirement applies (a) to all contracts with a minor who resides in or renders services in New York, (b) whether or not the contract is ratified by a court, and (c) apparently, irrespective of whether the contract was entered into prior to the effective date of the Act. If the guardian fails to establish the trust account or provide the employer with the information required to make transfers to the account, the employer must remit the required withholding to the state comptroller, to be deposited in the state’s new “Child Performer’s Holding Fund,” for the benefit of the performer. In addition, the new Act provides that the State Department of Labor shall enforce educational requirements for the performer. If the minor is to be absent from school due to his or her employment schedule, the employer must provide a teacher who is licensed in New York, or has credentials recognized by New York.