Gig Worker Law (AB5)
What’s the Deal with the New California Gig Worker Law (AB5)?
A change is coming to freelancers and other workers in California, affecting a broad spectrum of people, including writers, designers, cosmetologists, and Uber/Lyft drivers. Some people are pleased with it, others… not so much. It’s a new state law taking effect in January 2020, known as AB5 (Assembly Bill 5) or the “gig worker law” or the “gig worker bill.” Here’s what you need to know.
First, the backstory. Legally speaking, there are essentially 2 types of workers: employees and independent contractors (aka “freelancers” or “gig workers”). Companies, as well as many workers, often prefer an independent contractor situation rather than traditional employment for several reasons. But companies do not necessarily get to decide whether a worker is an employee or an independent contractor; nor does the worker. The law decides this.
How does the law determine who is an independent contractor?
Before April 2018, workers generally could be considered freelancers if the hiring entity did not have control over the freelancer, including things like schedule, method of performing the services, etc. (the “control” standard). Control over the worker means they are an employee instead of a freelancer. That month, the Dynamex court case was decided which created a higher standard for a worker to be considered a freelancer. The court said that you may be an independent contractor only if you meet ALL of the following:
(a) you are free from the control and direction of the employer;
(b) you perform work that is outside the hirer’s core business; AND
(c) you customarily engage in “an independently established trade, occupation or business.”1Dynamex Operations West, Inc. v. Superior Court
This became known as the “Dynamex Test.” The 2nd requirement – whether you perform work within the hirer’s core business – potentially moves millions more workers from freelancers into the employee category.
In September 2019, the California legislature passed AB5, known as the “Gig Worker Law,” which goes into effect January 2020. AB5 essentially reaffirms the Dynamex Test. But it also created many exemptions, and a very complex structure for determining when those exemptions apply. For those who are exempt, the older “control” standard applies.
Some professions were given blanket exemptions, including doctors, lawyers, finance professionals, and others. Others were given conditional exemptions, including marketing professionals, human resources, graphic designers, fine artists, photographers, ‘freelance’ journalists, ‘freelancer’ writers or editors, and others.
In particular, the conditions on journalists, photographers, and writers are highly controversial, and many people are concerned it may “wipe them out.” These professionals may be exempt only if they do not provide content submissions to any particular client more than 35 times per year. The idea is that if you are writing more than 3 stories per month for a media company, you really “should” be on staff with that company.
The trouble is, these companies may not agree with that. And instead of simply converting a freelancer to an employee, they may just drop the worker altogether. Many such companies are considering shutting out California based freelancers to avoid the new regulations.
See more details about the new law at our Guide to Freelancer vs Employee.
What can I do about the new law?
If you’re not sure how the new law applies to you, contact a business or employment lawyer.
If you’re not happy with the changes, you can contact the office of Assemblymember Lorena Gonzalez, who wrote the law. She says she is open to making some changes. Or contact your own California assemblymember and/or state senator (see our Guide to Legal Basics), or Governor Newsom’s office. Also, there will likely be a ballot measure in November 2020 to overturn the new law. It’s being funded by Uber, Lyft, and DoorDash.
If you are happy with the changes, then you can just sit back and enjoy.
Either way, let us know if you are concerned how the new law affects you.