ARE YOU A "FAVORED NATION?"
A Favored Nation clause (often referred to as "Most Favored Nations" or "MFN")can be a useful negotiating tool for actors and agents. In order for actors to protect themselves from misuse of the clause, however, members need to understand what the term means and how it is used. The explanation below covers the topic thoroughly, if somewhat dryly. (No one ever said taking care of the business end of your career was going to be fun or easy, but it is your responsibility!). Most importantly, if you negotiate a Favored Nations clause, put it in writing!
Q. What is a Favored Nations clause?
A. The term Favored Nations refers to a negotiated agreement between a producer and an individual actor which generally indicates that if other actors in the show (as specified) receive better terms (as specified) than this individual, then this individual actor will be entitled to those same terms. (It does not mean that everyone in the show is being paid the same.) For such an agreement to be valid and enforceable, it should be in writing and includedas a partof a rider to an individual employment contract.
Q. What Rule covers this in our rulebooks?
A. Equity-negotiated collective bargaining agreements do not contain Favored Nations clauses (with the exception of the Workshop Agreement),# and therefore none appear in the Production Contract, LORT, Stock or other Rulebooks. However, Equity will accept an individual employment contract with a rider containing a Favored Nations clause, as long as it is properly worded, and will administer the clause or rider as part of that individual employment agreement.
Q. What is the purpose of using a Favored Nations rider?
A. The Favored Nations rider has been utilized as a tool by an actor and his/her representative to to ensure that no one else in the company (primarily, someone having the same stature or playing the same size role) was getting a better deal. It also became a means of allowing an actor who would normally command a large salary to work for a lower salary without cheapening that actor's value. For example, an experienced actor who would normally be paid higher than minimum might choose to do a role in a not-for-profit theatre which cannot afford to pay more than minimum, and by including the Favored Nations rider the actor, in essence, says to the commercial entertainment world: "I still don't work for minimum, but in this particular situation I'm willing to as long as I know that no one else is being paid more than I am."
In recent years in not-for-profit theatres, however, the Favored Nations rider has often been initiated by the producer and offered wholesale to everyone or nearly everyone in the company. This situation will be discussed more thoroughly later in this article.
Q. What is the wording of the Favored Nations Rider?
A. There is no standard wording for a Favored Nations rider; each one is individually negotiated. Below are two examples of general wording in which the italicized phrases could be modified according to the specific terms the parties agreed would be subject to the Favored Nations clause:
Example 1. "The Theatre guarantees that no actor shall receive a higher compensation than the undersigned actor. Should any actor receive such higher compensation, the undersigned actor's compensation shall automatically be increased to that higher amount."
Example 2. "In the event any other actor engaged for the PLAY is entitled or becomes entitled to receive compensation or terms and conditions more favorable than that provided ACTOR hereunder, MANAGER shall promptly advise ACTOR of such fact, and ACTOR's compensation shall be increased automatically to such higher amount, and/or comparable terms and conditions shall be provided for ACTOR."
Q. What terms are covered in a Favored Nations rider?
A. Only those terms which are specified will be covered. The terms to be covered are individually negotiated and will therefore vary from show to show or actor to actor. Any individually negotiable item may be the subject of a Favored Nations rider. These can include such things as salary, expense money, transportation, housing, dressing room space, or even the care of one's pet. (Billing may also be part of a Favored Nations rider if everyone in the show is being billed alphabetically, but usually individual billing is the subject of a separate billing clause.) Sometimes a general term, such as "compensation," is used. You should be as specific as possible about what terms and conditions are included.
It should be understood, however, that any compensation paid to an actor which is the minimum required by the Equity Contract will not activate a Favored Nations rider in another actor's contract unless the rider is worded to include these conditions. It is not considered favoritism by Management to pay an actor the minimum which Equity requires in any situation. Therefore, it is possible for an actor with a Favored Nations rider to be earning less than another actor in the show if, for instance, both actors are earning minimum but the second actor also receives the minimum increment for being dance captain.
Q. Does the Favored Nations rider include everyone in the show?
A. Not necessarily. A Favored Nations rider may include everyone in a production, or it may exclude certain members of the cast, or there may be several different riders in a company, each including a specific group of roles. Using the wording of Example 1 above for a production of "West Side Story," the variations might be as follows:
Variation 1. Tony and Maria have riders worded exactly as in Example 1.
Variation 2. Bernardo and Anita have riders as follows: "The Theatre guarantees that no actor, except for the actors playing Tony and Maria, shall receive a higher compensation than the undersigned actor. Should any actor, except those playing Tony and Maria, receive such higher compensation, the undersigned actor's compensation shall automatically be increased to that higher amount."
Variation 3. Jets and Sharks have the following rider: "The Theatre guarantees that no actor of those playing the roles of Chino, Riff, A-Rab, Action, Snowboy or Baby John shall receive higher compensation than the undersigned actor. Should any of those actors receive such higher compensation, the undersigned actor's compensation shall automatically be increased to that higher amount."
Q. What if a producer offers me minimum and says, "It's Favored Nations; I can't pay you more than minimum."
A. Just because the producer has offered someone else in the company a Favored Nations Rider, doesn't mean he can't pay you higher. It simply means he would then also have to pay the higher salary to any actor who had signed such a rider. You can still try to negotiate higher. If the producer says no, you have the choice of accepting the job at minimum or turning it down. You can also ask the producer what terms are included in other actors' Favored Nations riders. If only salary is included, you can try to negotiate better terms in other areas to make up for the minimum salary.
Also, if you think you are one of the first actors to be offered a role for this show, you can suggest that the producer exclude you or your role from everyone else's Favored Nations rider (see Variation 2 above.) In any case, if you accept a job which a producer has stipulated as being on a Favored Nations rider, make sure you get a rider on your contract stating what is covered by the Favored Nations terms.
Even if a producer initiates the Favored Nations clause and seems to be doing so as a means of keeping everyone at minimum, it can still protect you as long as it's in writing. When a contract containing a Favored Nations rider is filed with Equity, all other relevant contracts for that company are checked to make certain that the terms of the rider are being adhered to. So if you have it in writing, you can be sure that the producer isn't telling you that it's Favored Nations at minimum and then paying someone else more. (If the producer won't give you the Favored Nations rider in writing, it doesn't exist).
And remember, you don't have to accept the producer's offer. It is a valid option to say, "I'm sorry. I can't accept the role under those terms and conditions." This throws the ball back in the producer's court. There are times when this will cause a change in the offer rather than a withdrawal, although you have to be prepared for the possibility of a withdrawal. In some cases, there truly isn't money to pay anyone above minimum and the producer thinks he's being a nice guy by offering the Favored Nations clause up front.
If you have any doubt about the wording of a Favored Nations rider or what is covered by the rider, discuss it thoroughly with your agent or other representative before you sign the rider. You may also call Equity if you have any additional questions or concerns.