On January 1, 2020, freelancers in every industry felt the impact of California’s new law that puts restrictions on their line of work. It’s all under the guise of protecting workers and ensuring that people who should be classified as full-time workers are considered as such. This so that they receive benefits denied to independent contractors and freelancers.
Ultimately, California Assembly Bill 5 (AB5) prevents those who choose to freelance or work as independent contractors from doing so, which could have serious consequences for both workers and the economy.
Who Does AB5 Affect?
In California, if one does any type of freelance or independent contractor work, the new law will have an effect on their ability to work. It has a significant effect on freelance journalists, independent construction contractors, truck drivers, etc. Essentially, if you contract with a company, you may be in a bind.
It doesn’t even matter if you have full-time work and supplement your income with freelance or independent contractor work. Having two or three companies you work with doesn’t matter, either.
There are a lot of practical and legal issues to be worked through. One of the most pressing has to do with freelancers having multiple employers. If a freelancer works for multiple businesses, which one must take on the responsibility of providing them with full-time benefits?
According to Upwork, a freelance marketplace website, 46% of the 57 million freelancers “were unable to work for a traditional employer due to personal circumstances.”
Many people choose to work as freelancers or independent contractors for the flexibility it offers. Others may have disabilities or difficulties working in an office, retail or service industry environment.
Freelance Journalists, Writers, Bloggers and Others Freelancers Hit Hard
AB5 established that a journalist, writer or blogger must be classified as employed if they contribute more than 35 articles per year to a website. In response, VOX let go of 200 freelancers in California right before Christmas.
Companies that have already tight margins cannot typically afford the 30% increase in labor costs or the businesses are at risk of going under in many cases. However, it’s not just traditional forms of writing that are affected. Transcriptionists and listicles are also heavily impacted and are often in big demand.
What Are the Criteria to Determine if Someone Is an Employee or Freelancer?
The AB5 law requires workers to take a three-part ABC test. This test determines if someone is an employee or an independent contractor. When asked about the nature of one’s work, the criteria asks if their work…
- is done without the direction and control of the employer
- is performed outside the usual course of the employer’s business
- is done by someone who has their own, independent business or trade doing that kind of work
The second stipulation is the most problematic part for freelancers. Companies are hiring freelancers for the purpose of getting their “usual” work done and many freelancers work are not registered as a company in the form of an LLC or corporation.
Lawsuits Are Pending
The American Society of Journalists and Authors are fighting the law saying that it unconstitutionally affects one’s free speech and that the limit of 35 articles per year to each media outlet is “irrational and arbitrary.”
In addition, other trade groups representing construction contractors and truck drivers have also sued to stop the law in federal court.
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