California Freelancers Say New Exemption Law Still Not Enough

January 17, 2021 Updated: January 19, 2021

California freelancers derailed by last year’s controversial gig worker mandate are set to receive more exemptions through a newly enacted law—but opponents say the new bill still isn’t enough to offset the harm done to them by AB 5.

Assembly Bill 2257 (AB 2257), which went into effect Jan. 1, adds new exceptions to AB 5 requirements for independent workers, including exemptions for professional services, business-to-business, and referral agencies. However, many freelance workers are not satisfied, either because their professions weren’t included or the exemptions remain too strict.

“There are a handful of professions that did receive legitimate relief, but hundreds of categories of professions and trades are still left out in the cold,” Karen Anderson, founder of the Facebook group Freelancers Against AB 5, told The Epoch Times. “There are many roadblocks and caveats embedded within the so-called exemptions.”

Anderson said the bill doesn’t go far enough in allowing employers to hire gig workers.

“We are hearing from employment law attorneys that AB 2257 doesn’t move the needle that much in terms of giving their clients the green light to hire an independent contractor,” she said.

Despite the new exemptions carved out in AB 2257, “many people’s careers and livelihoods had been destroyed in the interim, so their exemption was a little too late,” Anderson said.

“They had already disbanded their business or moved out of state. The scorched-earth policymaking decimated many people’s careers, even those who had a blanket exemption from the beginning or have now received an exemption.”

AB 5, which went into effect at the beginning of 2020, requires companies to classify workers as full-time employees, and pay required benefits and taxes, unless certain conditions are met. Opponents say the law instead led to the decimation of the state’s thriving gig economy, leaving hundreds of industries without work right before the COVID-19 pandemic.

Now lawyers are advising employers to hire contractors from other states, according to Anderson, since AB 5 could land them on the Employment Development Department’s (EDD) radar for an audit.

“Many law firms, large and small, are simply giving blanket advice to their clients to stay away from [California] freelancers, even if there is a pathway to an exemption,” Anderson said via text.

Anderson’s Facebook group has garnered 19,000 members who feel they’ve been disenfranchised since AB 5 went into effect. She’s provided members with as many resources as possible, posting updates to the bill and legal advice to the group over the last year.

The law underwent a few modifications in 2020 following the protests of some non-unionized gig workers, including journalists, musicians, health care workers, translators, ride-share drivers, interpreters, and photographers. AB 2257 broadens the exemptions.

Anderson said AB 2257 added several more professions to the referral agency exemption, including tutors, but for most professions, the exemption doesn’t work because there are 11 factors that need to be satisfied for the exemption to be applicable.

“The referral agency needs to be more like a jobs-posting board that exerts no control or direction over the service provider,” Anderson said. For example, although tutors are now exempt, the tutoring companies that connect them with clients remain limited. “Unfortunately, for tutoring companies this doesn’t work out because they cannot provide curriculum, standards, or training.”

Pharmacists, optometrists, rehab specialists, speech pathologists, nurse anesthetists, physical therapists, forensic nurses, and phlebotomists are among the dozens of professions that remain non-exempt.

Creating More Exemptions

The new AB 2257 law attempts to clarify and broaden both existing and additional exemptions, according to Assemblywoman Lorena Gonzalez (D-San Diego), who wrote AB 5.

“AB 2257 represents a comprehensive framework for employment law that makes a clear distinction between employer-employee relationships and professionals that run their own independent businesses,” Gonzalez said in a press release.

Gonzalez said the new law reclassifies statutes for what constitutes a freelancer and expands the three-pronged ABC test used to determine whether someone falls under independent contractor status. The test mandates that freelancers must have extensive freedom in how they accomplish their work, be in the same industry as the company they’re contracting for, and do the work outside of the usual course of the hiring entity’s business.

“This legislation was a product of robust dialogue over the last year with workers and businesses from every part of the state,” Gonzalez said.

But AB 2257 remains ambiguous despite adding several exemption categories, according to Lizelle Brandt, an attorney from Pasadena who specializes in entertainment law and represents small business owners, filmmakers, and recording artists.

“They’ve got psychologists who are exempt, but then you’ve got all these marriage and family therapists that aren’t—so a lot of it is just no reason as to why some of these industries are getting exemptions, but others are not,” Brandt told The Epoch Times.

“There’s just a lot of issues I would say that are just going to remain; hopefully [the gig worker law] will continue to be modified. But in the meantime, only some have gained relief [and] it continues to be vague in a lot of different areas.”

Brandt said many gig workers who lobbied and protested the original bill received exemptions earlier—while those left out accuse lawmakers of “cherry-picking.”

“It seems like the squeaky wheel is the one that gets the exemptions,” said Brandt.

She singled out interpreters as freelance workers whose protestations resulted in exemptions.

“Interpreters were pretty good actually about being loud, and it almost seems like the more you’re able to organize and be loud and get attention, then that helps,” she said.

“But I don’t know if that’s the proper way to legislate. I would say the best thing to do is to be fair across the board, and not pay attention only to the ones that are making the loudest noise—because then you have this disproportionate unfair method of giving out exemptions.”

Epoch Times Photo
Workers hold signs at a rally opposing Proposition 22, a measure that would allow ride-share drivers to work as independent contractors, in Orange, Calif., on Oct. 16, 2020. (John Fredricks/The Epoch Times)

A Matter of Interpretation

But even interpreters who were outlined in AB 2577’s new exemption list say the new bill doesn’t go far enough, because it doesn’t allow freelancers to work together on a single job.

“I have to be able to show that I’m a ‘referral agency’ in order to be able to work together with my colleague,” interpreter Madeline Rios told The Epoch Times.

For interpreters to subcontract other interpreters under AB 2257, they must be certified. While this is generally a good thing, said Rios, many interpreters only specialize in conferences, not legal services.

“They don’t have a certification, but they might have graduated from one of the most prestigious universities, specializing in translating and interpreting,” she said. “But I could not use them.”

Rios, who is based in Claremont, said the new law has actually concentrated control of the industry into the hands of larger companies.

“The smaller companies are the ones that are suffering,” she said. “We can’t network with each other the way we used to—which was our number one defense against these big corporations—and now the big corporations are the ones that are strengthened.”

Rios specializes in legal translation from Spanish to English, including the translation of Supreme Court documents from Latin America into English and translating Latin American court evidence. Prior to AB 5, she had dozens of agencies contracting her for her kind of work, which not many people are qualified to do.

But with AB 5, those agencies would have to hire her full-time, she said—even though there were occasions when she would work for one company for only 30 minutes every two years. Without an exemption, the law would mandate that she’d need to be classified as an employee, even in that scenario.

In addition, deductions including books, travel, education, equipment, and software would end up being taxed.

“We were not the owners of agencies that were exploiting people, we were the people that were doing the work. In the best-case scenario … we would have lost 100 percent of our business deductions,” Rios said.

“If everybody made us employees, we would be taxed on a gross income. So we would be paying taxes on about 150 percent of our real earnings, and we would have lost our self-employment health insurance credit,” she said.

At that point, interpreters wouldn’t qualify for a pension, health insurance, vacation, or sick pay because “we would never work for anybody for more than, at most, two weeks at a time, and sometimes as little as half a day, sometimes as little as a few hours.”

“So that was our initial reaction. I can’t come up with an extra $15,000 with taxes per year on my federal income tax,” she said.

She added that COVID-19 restrictions created another hurdle for interpreters, as referral agencies in California hired out-of-state translators for telemedicine purposes to get around AB 5.

“In the end, the exemption is relatively decent, but it’s not complete,” said Rios.

Epoch Times Photo
Workers hold signs calling for onlookers to vote against Proposition 22 at a gathering in Orange, Calif., on Oct. 16, 2020. (John Fredricks/The Epoch Times)

Getting in on the Act

Rios believes AB 5 is one of the main reasons Democrats lost Congressional seats in California in the last election. She didn’t vote Republican, but said a number of her colleagues did.

“A lot of people who were lifelong Democrats started voting for Republicans, except for Trump, particularly in California because of AB 5,” she said.

But proponents of the bill, like the California Labor Federation, called AB 5 “the most important state law in decades to address widespread inequality by raising wages for workers and holding corporations accountable.”

AB 5 could have a national spotlight under President-elect Joe Biden’s administration through the Protecting the Right to Organize Act (Pro Act), approved by the House in 2019. The act expanded the definitions of employer and employee to discourage the use of independent contractors, and strengthened labor unions.

Rios is concerned the Pro Act will result in jobs shifting overseas.

“When they make it illegal for them to hire anybody, basically they’re making it illegal for these companies to subcontract people in the U.S.,” Rios said. “U.S. freelancers will no longer have any work, or will not have a significant amount of work, because it’s all electronic—you can send it anywhere.”

Meanwhile, the fight to repeal AB 5 altogether continues.

In the November election, Californians passed Proposition 22, which rebuked AB 5 and classifies app-based ride-share workers as independent contractors instead of employees. But on Jan. 12, shortly after it became law, some drivers filed a lawsuit to overturn the initiative, calling it “unconstitutional.”

State Assemblyman Kevin Kiley (R-Rocklin) has introduced bill AB 25 “to fully repeal what remains of AB 5 and restore the right to earn a living for thousands of Californians.”

Kiley said in a Jan. 14 Facebook post, “The Legislature should act immediately to acknowledge the incredible harms of this law and revive the livelihoods of freelancers across the state.”

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