California Limits Unpopular Law That Restricted Freelancers

September 6, 2020 Updated: September 7, 2020

California Gov. Gavin Newsom quietly signed a law on Sept. 4 repealing parts of an unpopular law that put independent contractors in the state out of work and limited the earnings of freelancers, including visual artists, musicians, writers, translators, and film support crews, by classifying them as employees.

The enactment of the new measure, which came after months of political and legal pressure from the trucking industry, companies such as Uber and Postmates, and groups such as the American Society of Journalists and Authors Inc. and the National Press Photographers Association, is a rare defeat for the labor movement in solidly progressive California.

The new law, known as AB 2257, passed both chambers of the state legislature unanimously on Aug. 31. The Democratic governor announced on his website Sept. 4 that he had signed the measure but offered no explanation for why he had done so. The governor’s office could not immediately be reached for comment.

The new law took effect immediately upon signing.

AB 2257 amended AB 5, which attempted to determine who is a contractor and who is an employee and forced companies to reclassify their freelancers as employees. The new law provides greater flexibility to freelancers.

When AB 5 took effect Jan. 1, that law made it hard for so-called gig-economy companies to classify people who work for them as independent contractors instead of employees. The idea being the measure was to prevent freelancers from being unfairly exploited by employers.

Assemblywoman Lorena Gonzalez, a San Diego Democrat, wrote AB5 to implement a 2018 California Supreme Court decision known as Dynamex Operations West Inc. v. Superior Court, that deemed many freelancers to be employees, a status that entitled them to the minimum wage, overtime pay, unemployment insurance, and health benefits.

Employees in California are entitled to benefits not available to contractors, such as the minimum wage, health insurance, and paid time off. AB 5 was strongly backed by labor organizations critical of hard-to-unionize freelance jobs. Unions hoped the law would give them an edge in recruiting new members.

AB 5 was enacted ostensibly to help workers by preventing their “misclassification” as non-employees.

It adopted the so-called “ABC” test to determine employee status, according to the Economic Policy Institute (EPI). The test stipulates that workers may only be considered independent contractors when a business proves the workers “a. Are free from control and direction by the hiring company; b. Perform work outside the usual course of business of the hiring entity; and c. Are independently established in that trade, occupation, or business.”

But mere weeks after the enactment of AB 5, which is still being challenged in the courts, the law ran into headwinds as freelance workers and others in a state with many independent contractors suddenly found themselves out of work or with their ability to earn a living severely restricted.

It stopped freelance writers from accepting more than 35 assignments from a single publisher and hindered the ability of musicians to accept regular paying gigs. Companies outside California stopped using freelancers in the state as they feared financial penalties for violating the law.

Gonzalez admitted there were problems back in February.

Gonzalez wrote in a Feb. 6 tweet that she was willing to consider easing the restriction affecting journalists. “Based on dozens of meetings with freelance journalists & photographers, we have submitted language to legislative counsel that … will cut out the 35 [articles] submission cap & instead more clearly define freelancer journalism,” she wrote.

Later in the month she reported progress on writing what turned out to be AB 2257.

“Having heard additional feedback from a variety of freelance writers, photographers and journalists, we are making changes to Assembly Bill 5 that accommodate their needs and still provide protections from misclassification,” she said February 27.

AB 2257 abolishes the 35 item submission limit for writers and photographers contained in AB 5. It also exempts translators, appraisers, and registered foresters from the restrictions.

Gig-economy companies are supporting a state ballot initiative this Nov. 3, Proposition 22, that would treat app-based drivers as independent contractors, not as employees.