Recently, Governor Newsom signed Assembly Bill 5 into law which essentially forces millions of employers in California to re-classify independent contractors as employees. The bill has received fervent support from labor rights groups and drivers for companies like Lyft and Uber, and the latter now must be paid at least $12 per hour (California’s minimum wage) and receive mandated benefits like paid parental leave, overtime, and the right to form an official union.
However, while AB5 has been hailed as a victory for app-based gig workers and millions of other workers performing physical labor using their own vehicles and supplies, it’s gotten the expected backlash from Silicon Valley. It’s also been raising a lot of questions for freelance writers like us, especially if we do this full-time for a living and it’s not just a side hustle.
Once the bill was passed, many companies have become concerned about working with freelancers who are California residents. Are writers exempt? What types of writers?
Who is an Independent Contractor Under California Law?
AB5 builds on a 2018 California Supreme Court edict known as the Dynamex decision. Basically, a worker is only an independent contractor if they meet all three of the following conditions dubbed “the ABC test”:
A. The worker must be totally independent, not under control by the employer
B. The work being performed can’t be central to the client’s business
C. The worker has an independent business.
Even if you haven’t set up an LLC or other formalized entity, it’s that B test that’s the most concerning if you reside in California or have any clients headquartered there.
States have the right to set their own standards for what differentiates an employee from an independent contractor. Under federal law though, the IRS and Department of Labor condensed their old 20-factor test into three major factors for common law employees that determine whether you’re an independent contractor or not. Namely, behavioral and financial control, and the type of relationship that you have.
Since several professions can fall into gray areas with these factors–for instance, I’ve had many business-client relationships far longer than the duration of any employment I’ve ever held–exceptions were carved out in AB5 for most professional sector work like attorneys and doctors. Writers got an exception too, but it was obvious that the authors of the bill did not listen to freelance writers and journalists.
Detrimental Reliance and The 35-Piece Exception for Writers
When I did my master’s thesis on independent contractor issues before the term “gig economy” entered our lexicon, I’ve found it shocking that I don’t hear the term “detrimental reliance” thrown around more often or references to the 1947 Supreme Court case Silk v. United States.
Needless to say, the economy is wildly different today than it was in 1947 but this case set the stage for worker classification and is still cited as precedent. In short, Silk was a coal company that hired truckers and yard workers, all of who provided their own tools. Based on the notion of “detrimental reliance”, what would be the B part of that ABC Test, the yard workers were deemed employees because there was no way Silk had a business without people to break up the coal and get it ready for shipment. They also did this all day. However, the truckers were independent contractors because they performed similar services for other companies and they were not considered central to Silk’s operations.
Because writing services can be central to many media companies, while incidental to others, this presents the murkiest area for writers. The 35-piece exception hurts independent labor because it’s easy to exceed 35 submissions in a month or even less, and an ongoing relationship with an agency or publication doesn’t make you any less independent.
While the bill was intended to target “permalance” positions that essentially request a 40-hour work week but grant none of the benefits or security that traditionally came with newsroom employment, freelance marketers and web content writers got caught in the crossfire against genuine exploitation. As the Columbia Journalism Review piece pointed out, it’s made even more confusing by agencies and conglomerates further muddying the 35-piece limit. Writing for marketing purposes could have an exception to this rule, but it remains worrisome for independent labor as the law goes into effect in 2020.
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Prior to taking up the game development and writing hustler life, Rachel P. worked as a tax advisor. She still retains an Enrolled Agent license for tax law writing purposes. Rachel has 10 years of tax practice experience ranging from retail tax preparation to white-shoe firm, and solo practice. She worked with Prometric and high-ranking IRS directors in developing the Enrolled Agent exam for three years running, determining minimum competency requirements for Enrolled Agents along with creating and editing exam content. She also worked with Pearson to develop educational tax law content for use in online adult education programs.
