If you live in California, there’s a good chance you’ve heard of AB-5, which is officially known as Assembly Bill 5. This bill was intended to curb the number of independent contractors a business hires and uses. For example: let’s say a business wishes to cut their employee expenses. One of the ways to do that is to fire all the employees and hire them back as independent contractors. This means that a business no longer has to send out W-2s or pay employment taxes on its employees. Instead, they simply send out MISC-1099s to employees at the end of the year. For a large business, this is a great way to reduce overhead by not paying employment taxes or benefits, like health insurance, personal days and holidays. In practice, this bill has the real potential to put freelance writers and gig workers out of business. The law was approved September 18, 2019 and takes effect Jan. 1, 2020.
What Are the Stipulations in AB-5?
The biggest stipulation to freelancers and journalists in California is the 35 assignment limit. This means that a journalist or freelance writer cannot complete more than 35 assignments each year for any one platform or news media outlet. That breaks down to 2.91 assignments a month. That’s probably not enough to pay bills, eat or do anything else, unless of course, you were able to negotiate four-figures for every assignment. Most freelancers and independent contractors won’t be able to command such a high price, and the real fear is becoming homeless due to the inability to pay living expenses.
Where Did This Bill Come From?
AB-5 originated from Dynamex Operations West, Inc. v. Superior Court of Los Angeles (2018) 4 Cal.5th 903, and seeks to clarify the differences between an independent contractor and an employee for the express purposes of California wage orders.
Understanding the ABC Test
The Dynamex case created an ABC test to determine if a worker is an independent contractor or an employee. The ABC test states that:
- A worker must be free from the company’s control.
- Can’t be doing work that is essential to the company’s business to function.
- Is an independent business in X industry.
In other words, most freelance writers and journalists won’t pass this ABC test because they provide content to places where the primary business model is the production and distribution of content. Most independent freelancers are also sole-proprietors, which could be considered a gray area when trying to determine if a freelancer is a business.
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Why the 35 Article/Assignment Limit
This limitation was meant for freelance journalists. The goal was to force news and media outlets to hire their regular freelance journalists as part-time employees. The assumption was that these journalists may have weekly columns. If they provide one article every week, that means they provide 52 assignments per year to the outlet. Under AB-5, they would be considered an employee, and the outlet would have to hire the independent journalist as a part-time employee, which means they’d get an hourly wage and all the other benefits afforded to part-time employees. The business would also have to pay employment taxes on that part-time employee as well as unemployment insurance.
The Real World Impact of AB-5
While the intentions may have been good for this bill, the real-world impact could make freelancing in California impossible because the bill doesn’t just limit journalists. It limits all types of writing for hire as an independent contractor, and the ripple effects are already being seen.
- Textbroker is limiting their California writers to 34 articles per year and removing Open Orders as an option.
- Scripted has announced they are suspending the accounts of their California writers.
- Vox Media (SB Nation) is no longer working with freelance writers in California.
- Northstar Travel Media has severely truncated its use of California freelancers.
- iWriter cancled/blocked the accounts of California writers.
- Writer's Access - 35 orders per client and a requirement to register as a business by Feb 15, 2020
I'm adding to this list as I hear about places that are limiting writers.
Is There a Solution to AB-5?
Not yet. There is a petition that is just getting underway. It can be found here: https://www.change.org/p/california-assembly-labor-committee-oppose-california-bill-ab-5, and several lawsuits have been filed against the bill, including:
- California Trucking Association challenges AB 5 in lawsuit
- CA AB 5 labor law triggers lawsuits from workers, business
- Lawsuits Start Flying Over AB 5 | Engineering Contractors
Unfortunately, the petition doesn’t get seriously underway until next year, and the lawsuits are just starting, which means many freelancers in CA will see a dramatic drop in income before there is any solution to the problem, if there ever is a solution or an amendment to AB-5. If you used to live in CA and no longer live in CA, it’s important that you change your official address to your new address with every writing platform you work for ASAP.
There's Now a National Bill (Update Jan. 18, 2020)
If you weren't paying attention to AB-5 in California, you may want to start paying attention now, because there is now a national bill in Congress. It's designation is HR2474. So, while many freelance writers and other contract employees appear to be exiting the state of California for fear AB-5 will make them homseless, the national bill would put us all out of work. That's right. The bills are designed to get independent contractors hired on as employees, but the real world consiquence of this is going to be people out of work. businesses aren't going to hire independent contractors as fulltime employees. Or at least, very few will.
Contract Workers Being Affected by This
- Court Reporters
- News Paper Delivery Guys (Some are resorting to the USPS and other delivery companies to deliver their papers)
- Freelance Writers (technical, content, copywriters, etc)
- Freelance editors
- Teachers/Instructors (esp those in niche industries dance teachers, yoga yeachers, etc)
- Private Investigators
- People Who Provide Home Services on a Contract basis
- Independent contractors in other states who have contracted with a CA business to provide services
- Caterers - specifically the extra help they hire for events
- Ride share services (uber, Lyft, etc)
- Grocery delivery services (Instacart, Shipt, Uber eats, Grubhub, doordash)
- Task services (handymen)
I'm sure this is the short list.
Read More on Freelancing
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- Introductory Printers for Freelancing and Manuscript Printing That Will Meet Your Needs ...
- What should a Content Article Contain?
- What’s the Difference Between Custom Content and Content on Demand?
- How to Write a Content Article, Blog Post or Webpage with No Directions
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