September 8, 2020; National Law Review
The passage of California Assembly Bill 5 (AB5) last year was meant to ensure gig economy “independent contractors” received the protections other workers get. As the deadline for enforcement drew near, ride-hailing services in the state threatened to cease service entirely in order to—depending on your perspective—retool their model to start treating their drivers like employees or blackmail local government into letting them off the hook. (The appeals court granted Uber and Lyft a brief reprieve. Litigation is ongoing, and the court said they must have a 30-day implementation plan at the ready in case they lose their appeal.)
The delay affects more than rideshare companies, however, because although the giant app conglomerates were the bill’s main target (along with delivery drivers—the original cause of the 2018 California state supreme court decision in Dynamex Operations West, Inc. v. Superior Court of Los Angeles), it also placed creative workers like performance artists and certain kinds of freelancers—including journalists—in the crosshairs. Yesterday, California’s governor Gavin Newsom signed AB2257, which gives greater leeway and exemption to 75 categories of workers like these.
AB5, based on the Dynamex decision, applies a three-part test to determine whether a job is being performed by an independent contractor or an employee. A contractor must be “free from control of the entity paying his or her wages,” “doing work that is outside the usual course of business of the employer,” and “engaged in an independently established business.” Under the terms of the law, a freelance journalist could submit only 35 pieces a year to a given news outlet before the enterprise would have to either make them an employee or stop using their work. The newly signed bill keeps the three-part test but lifts this limit and allows for contracting freelancers for extended periods so long as they are:
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under a written contract that specifies the rate of pay and obligation to pay by a defined time, as long as the individual providing the services is not directly replacing an employee who performed the same work at the same volume for the hiring entity; the individual does not primarily perform the work at the hiring entity’s business location, notwithstanding paragraph (1) of subdivision (a); and the individual is not restricted from working for more than one hiring entity.
In short, the work they do must not replace that of an employee.
The new bill also “authorizes an action for injunctive relief to prevent misclassification of employees, to be prosecuted against a putative employer by the Attorney General or a city attorney” and “authorize[s] a district attorney to prosecute an action for injunctive relief,” giving the law some teeth.—Jason Schneiderman
