First, I personally think that all this could be avoided by simply designating who ever the "employer" is, as the "producer".
Second, I doubt that this would hold up in court. It is inequitable. In order for any contract to be enforceable, it has to be fair. I think this deal is not fair.
Producers are entitled to points. The entire recording business is built upon this tenant.. BTW, engineers now have the right to claim copyright for their contribution to a recording as well. Attempts to exclude engineers and producers from being able to assert these rights are in my opinion, unfair, shortsighted and cheap.
If someone were to approach me with this contract and ask me to "produce" them under these conditions, I would tell them to produce it themselves ... I don't work for free or for partial payment. I will engineer it but you produce, OK? If you want me to "produce" then pay me as a producer. Pay as a producer includes not only up front fees / advances but also points.
The funny thing is I usually see this kind of thing from artists who have an inflated expectation of what the recording is going to do in the market ... usually, it's much to-do about nothing.
Bottom line is, if you want to make it in the recording business, you got to sperad it around. 20% of something is better than 100% of nothing. It's a "pay to play" business. This kind of approach will not help..