California Contractor Misclassification Law Does Not Violate Free Speech

By Jeffrey Rhodes December 14, 2021
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The Golden Gate Bridge and San Francisco skyline behind it

California's Assembly Bill 5, which codified the "ABC test" for classifying workers as employees or independent contractors, does not violate the First Amendment by limiting employment exemptions for freelance writers, photographers and videographers, the 9th U.S. Circuit Court of Appeals ruled.

To confront the misclassification of employees as independent contractors, California passed Assembly Bill (AB) 5, then AB 2257, which codified a more expansive test for determining workers' statuses, albeit with certain occupational exceptions. Because freelance writers, photographers and others received a narrower exemption than was offered to certain other professionals, the American Society of Journalists and Authors Inc. and the National Press Photographers Association (collectively, ASJA) sued, alleging violations of the First Amendment and the Equal Protection Clause.

In a 2018 opinion, Dynamex Operations West, Inc. v. Superior Court of Los Angeles, the California Supreme Court dramatically altered state labor law by adopting the ABC test for ascertaining whether workers were employees or independent contractors. That test permits businesses to classify workers as independent contractors only if they: 1) are free from control and direction of the hirer; 2) perform work that is outside the usual course of the hiring entity's business; and 3) are customarily engaged in an independently established trade, occupation or business.

If a business cannot make that showing, its workers are deemed employees, in which case the business must comply with certain requirements, including paying federal Social Security and payroll taxes, unemployment insurance taxes, and state employment taxes; providing workers' compensation insurance; and complying with numerous state and federal statutes and regulations governing the wages, hours and working conditions of employees.

The Dynamex decision initially applied only to wage orders enforced by the California Division of Labor Standards Enforcement (DLSE). This meant that, outside DLSE enforcement, employers were governed by previous law that allowed greater flexibility in classification of workers. AB 5 expanded the Dynamex test to apply in all other contexts, with exceptions for certain occupations and industries. For example, the law exempted from the ABC test licensed doctors, lawyers, architects, engineers and accountants, as well as certain commercial fishermen, salesmen and investment advisors, among others. It also exempted those engaged in listed professional services, which included marketing, graphic design, grant writing, barbery, cosmetology and fine arts.

However, AB 5 limited the professional service exemption for freelance workers, including freelance writers and photographers, to those who submitted fewer than 35 pieces of work to a single entity in a given year. AB 5 also provided that the exemption did not apply to photographers, photojournalists and videographers working on motion pictures, which was defined to include projects produced for theatrical, television, Internet streaming for any device, commercial productions, broadcast news, music videos and live shows.

ASJA sued to enjoin the above limitations and thereby expand the freelance exemptions. It claimed that the submission limit and exclusion of motion picture workers offended the Free Speech, Free Press, and Equal Protection Clauses because the exemptions did not apply to other professionals, such as marketers and artists, who enjoyed broader exemptions from Dynamex's ABC test.

The district court denied ASJA's motions for a temporary restraining order and preliminary injunction. ASJA appealed the district court's decisions on these motions, and the state of California moved for dismissal of the lawsuit, which the district court granted. The ASJA appealed that decision as well.

On appeal, the 9th Circuit determined that AB 5 was not targeted to interfere with speech by journalists and the movie industry, but instead only incidentally affected speech. As a result, the statute was not subject to strict scrutiny, but was only subject to rational basis scrutiny, to satisfy constitutional limitations. California had a rational basis for passing AB 5 as part of its efforts to combat what it considered abuses of independent contractor status by employers in the specified industries.

As a result, the 9th Circuit upheld AB 5 and denied ASJA's appeal of the district court's decision.

American Society of Journalists and Authors Inc. v. Bonta, 9th Cir., No. 20-55734 (Oct. 6, 2021), petition for rehearing en banc denied (Nov. 23, 2021).

Professional Pointer: Worker misclassification laws have recently been enacted in states throughout the country, many of which make fine distinctions concerning employee status in various industries. So far, these statutes have generally survived constitutional challenges.

Jeffrey Rhodes is an attorney with McInroy, Rigby & Rhodes LLP in Arlington, Va.

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