California Freelancers Might Get Relief from AB 5’s Strict Limits

Businesses currently can’t accept more than 35 works a year from each freelancer

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Updated: 2/11/20

A controversial new independent-contractor standard in California limits the number of works businesses can accept from freelance journalists. After facing backlash from the freelancer community, the bill's sponsor said she is working to update and clarify the legislation.

AB 5, which took effect Jan. 1, aims to provide workplace protections to more people by requiring businesses to reclassify many independent contractors as employees. Employees are entitled to a minimum wage, overtime pay, unemployment insurance and other benefits that are not generally provided to independent contractors.

Though AB 5 targets on-demand workers, such as drivers for ride-hailing services, many other independent contractors are also covered by the law. Freelance writers, photographers, editors and cartoonists are exempt from AB 5 only if they produce no more than 35 works per year for each client.

"Based on dozens of meetings with freelance journalists & photographers, we have submitted language to legislative counsel that we hope to have available next week to put into AB 1850, which will cut out the 35 submission cap & instead more clearly define freelancer journalism," said Assemblywoman Lorena Gonzalez, D-San Diego, in a Feb. 6 tweet

Lawmakers are considering changes beyond the freelancer updates. "This is just a piece of the clarifications you will see in AB 1850," Gonzalez tweeted.

Although independent contractors and employers can anticipate some changes to the law, they shouldn't expect it to go away altogether. "Now is the time when HR has to go beyond compliance and become a strategic business partner," said Michael Lotito, an attorney with Littler in San Francisco. This is a C-suite issue, because it can affect the company's business model, he said.

A federal judge on Feb. 10 denied Uber's and Postmates' request to temporarily block AB 5, the San Francisco Chronicle reported. "The ruling does not bode well for gig companies doing business in California," said Elaine Turner, an attorney with Hall Estill in Oklahoma City. 

We've rounded up resources and articles from SHRM Online on the new law.

Freelancers Speak Up

Gonzalez has said that freelancers who consistently provide content to outlets should be employees with benefits such as paid sick leave and workers' compensation. Anxious California freelancers have met with Gonzalez to urge her to spearhead an amendment removing the cap that prohibits publications from accepting more than 35 pieces a year from each freelancer. Many freelancers said they cherish their flexible schedules and don't want staff jobs. Independent truck drivers have also protested the new law and filed a lawsuit asserting that AB 5 hurts independent drivers who use their own vehicles and set their own schedules. Additionally, gig-economy companies are promoting a ballot initiative that would exempt them from reclassifying their drivers as employees.

(SHRM Online)

[SHRM members-only online discussion platform: SHRM Connect]

Truck Drivers' Temporary Exemption Granted

The truck drivers' lawsuit argues that AB 5 is pre-empted by the Federal Aviation Administration Authorization Act (FAAAA), which prohibits states from enacting certain laws that impact interstate commerce. Judge Roger Benitez of the U.S. District Court for the Southern District of California said a temporary restraining order is warranted in this case. "Plaintiffs have shown that AB 5's Prong B is likely pre-empted by the FAAAA because AB 5 effectively mandates that motor carriers treat owner-operators as employees, rather than as the independent contractors that they are," he said. Benitez subsequently granted a longer-term preliminary injunction.

(SHRM Online)

The 'ABC' Test

AB 5 codifies a 2018 California Supreme Court decision that created a three-pronged test, called the "ABC test," to determine whether a worker should be classified as an employee or independent contractor. The prior test was a multifactor analysis that primarily focused on who exerted control over the work. But under the new test, all three of the following factors must be met for a worker to be properly classified as an independent contractor:

  • The worker is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact.
  • The worker performs tasks that are outside of the usual course of the hiring entity's business.
  • The worker is customarily engaged in an independently established trade, occupation or business of the same nature as the work performed for the hiring entity.

The court decision expanded the definition of "employee" under the California Wage Orders and placed the burden on companies to prove that independent contractors are properly classified. Though this decision only applied to wage orders, AB 5 extends the ABC test to all provisions of the California Labor Code and Unemployment Insurance Code unless another definition of "employee" is provided. 

(SHRM Online)

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