SACRAMENTO, Calif. — A judge at the California Office of Administrative Hearings issued a decision in the long-standing licensing case concerning LA Direct Models, renewing the agency’s license but also placing it under a four-month suspension.
Administrative Law Judge (ALJ) Eric Sawyer ordered the renewal of LA Direct’s California license, which had been challenged by the Labor Commission in 2018 after allegations against the agency and owner Derek Hay surfaced in a separate labor board dispute with former clients, the so-called “Jane Does” case.
Since that challenge, LA Direct has been operating in California with periodically renewed “temporary licenses.”
Concurrent with the renewal, ALJ Sawyer also decided that LA Direct’s license “shall be immediately suspended for four months.”
Hay was also ordered to review his business practices based on testimony provided during the license hearings, with Sawyer specifying the agent “shall be prohibited from referring clients to businesses engaged in escorting; having clients sign contracts, fee schedules, or similar documents, that have not been approved by the Labor Commissioner; charging clients kill fees or cancellation fees unless and until such fees are contained in a contract approved by the Labor Commissioner; collecting rent or other debts owed to Derek Hay or any other individual; and sending clients to assignments which respondent or its staff know or reasonably should know are hazardous to clients’ health, safety, or welfare.”
The judge wrote that “cause exists for discipline” of LA Direct’s license because the Labor Commissioner — represented by attorney Barton L. Jacka — “established by a preponderance of the evidence that respondent violated provisions” of the Talent Agency Act.
The violations cited by the judge included: “using contracts not approved by the Labor Commissioner, improperly withholding client funds, sending clients to hazardous work assignments and knowingly permitting persons of bad character to frequent its business.”
The decision also stated that “Mr. Hay is a person of bad character (for purposes of this statute) by virtue of referring clients” to an alleged escorting agency, but also that “Mr. Hay did not coerce or request his clients to participate in the escort business.”
The outdated “character” assessment language in section 1700.35 of the California Talent Agency Act dates from 1913, and states that “no talent agency shall knowingly permit any persons of bad character, prostitutes, gamblers, intoxicated persons, or procurers to frequent, or be employed in, the place of business of the talent agency.”
“In sum,” the judge concluded, LA Direct and Hay “harmed clients, but not so severely as to warrant outright revocation of respondent’s license in and of itself.”
Sawyer wrote that such a revocation “would be overly harsh and punitive” because Hay “is well-regarded by many in the adult entertainment industry and has been generally honest and straight-forward when working with clients and others in the business” and therefore he “is capable of understanding his wrongdoing, once so advised, and that he has the business acumen to correct it.”
The four-month suspension, Sawyer decided, should “provide sufficient time for Mr. Hay to recalibrate his attitude and respondent’s business practices.”
The suspension will also allow LA Direct’s current clients “to terminate their exclusive relationships with respondent, if they so choose, once they discover the violations established in this case.”
The decision is dated April 20, 2022 but was only made public over the weekend.
LA Direct Responds
“Under California law,” an LA Direct rep commented in reaction to the publication of the decision, the Division of Labor Standards Enforcement (DLSE) will have three months to consider its options on the decision, including whether to accept or reject, or whether to allow it to be adopted by operation of law, as it did recently in a separate temporary licensing case Direct Models initiated and won.”
The rep noted that the development, however would still not end the disputes between Direct Models and DLSE, “as Direct Models has a pending claim for damages against DLSE as well as a separate lawsuit for damages filed in the Los Angeles Superior Court for DLSE abuses against Direct Models.”
Direct Models’ attorney Richard Freeman commented that while he views “some of the conclusions and findings through a different lens than ALJ Sawyer,” he agrees with the decision that “the proposed ‘punishment’ of four months suspension, not license denial or revocation, [is] much more appropriate for what he found to be proven.”
Direct Models filed a separate lawsuit for damages in the Los Angeles Superior Court in April, alleging DLSE abuses against the agency. The complaint alleges “Intentional Interference with Prospective Economic Advantage, Abuse of Process, and Intentional Infliction of Emotional Distress arising from their intentional abuse of discretion in refusing to continue issuing Provisional Talent Agent Act Licenses to Direct Models on April 23, 2021, while the licensing action it had initiated was still pending.”
