How California’s new freelancer law is redefining the state’s gig economy -- and threatening the livelihoods of publishers and freelancers alike.

By William Dunkerley

Some publishers nationwide are already severing ties with freelancers and independent contractors based in California.

This is a warning: You may want to consider following suit. Why? Because of AB5.

What Is AB5?

At the heart of this matter is a new California labor law set to take effect on January 1, 2020. The law is often referred to as AB5. According to Forbes, under this law "an individual is presumed to be an employee" unless the company engaging that individual's services can prove that he or she is not an employee.

The convoluted law attempts to give companies guidance on the matter. It explains who is inescapably an employee, who can legimately be considered a freelancer or independent contractor, and under what circumstances. The law seems to give the State of California great latitude in making a final decision.

AB5 has triggered numerous headlines such as:

--“Is this the end of independent contractors in California?”

--“California threatens $1 trillion gig economy with new law”

--“California is attempting a massive labor experiment that could grow into a disaster for millions of workers”

--“New California bill sends freelancers scrambling”

--“California law unjustly and unconstitutionally restricts freelance journalists”

The law says that "a person providing labor or services for remuneration shall be considered an employee rather than an independent contractor unless the hiring entity demonstrates that all of the following conditions are satisfied:

"(A) The person is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact.

"(B) The person performs work that is outside the usual course of the hiring entity’s business.

"(C) The person is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed."

Who Is Exempt?

However, there are exemptions. One of them is for a "direct sales salesperson." If you use independent sales reps for selling advertising, this is something you should look into. But good luck. I have no idea what the term "direct sales salesperson" means. AB5 says the term is described in Section 650 of the Unemployment Insurance Code. But if you look there, you'll find the term mentioned but not defined. That leaves the matter as clear as mud.

Then there are professional services for marketing. Perhaps you use outside expertise for subscription marketing, selling ancillary products such as books, or sponsoring conferences or shows. But the exemption for professional marketing services has a proviso. They are exempt "provided that the contracted work is original and creative in character and the result of which depends primarily on the invention, imagination, or talent of the employee or work that is an essential part of or necessarily incident to any of the contracted work."

That's nice, but in whose opinion is something creative, imaginative, or inventive? Yours, the services provider's, or the State of California's? Once again, the guidance is no guidance at all. And it leaves you vulnerable to the whims of some state official.

What Are the Rules for Freelance Writers and Editors?

There is greater clarity, however, when it comes to the services of a freelance writer, editor, or newspaper cartoonist. They are exempt. But there is a major hitch. Once you've gotten more than 35 submissions from such a provider within a year, you've got yourself a new employee; the exemption no longer applies from that point forward. Here is the remarkable language of the exemption:

"Services provided by a freelance writer, editor, or newspaper cartoonist who does not provide content submissions to the putative employer more than 35 times per year. Items of content produced on a recurring basis related to a general topic shall be considered separate submissions for purposes of calculating the 35 times per year. For purposes of this clause, a “submission” is one or more items or forms of content by a freelance journalist that: (I) pertains to a specific event or topic; (II) is provided for in a contract that defines the scope of the work; (III) is accepted by the publication or company and published or posted for sale."

So if you have a freelancer posting news within his or her area of expertise, for example, that person could reach the 35-submissions-per-year limit very quickly. If the product of the work is tweets, it could happen in a day. Also note clause III. If taken literally, that would mean there is no exemption at all if the work of the freelancer is offered without charge to your readers.

And finally note that the law mentions a "newspaper cartoonist." I guess a cartoonist that submits to magazines does not get the exemption. Was that choice a matter of deliberateness by the law's authors, or just incompetence?

It is befuddling why California has enacted such a convoluted and unfair law. I've seen reports that various provisions were negotiated by special interest groups. Some were successful in getting what they wanted. The motion picture industry obviously exerted a strong hand in getting a clear exemption. The legislation's zigzag favoritism is reminiscent of the odd perimeters of gerrymandered political voting districts. In other words, it reeks of politics.

The IRS takes a simpler approach for differentiating between employees and independent contractors. According to the IRS website, "The general rule is that an individual is an independent contractor if the payer has the right to control or direct only the result of the work and not what will be done and how it will be done." That's 39 words. The California law: 5,835 words.

Backlash from Freelance Journalists

Fortunately, this outrageous law has produced sufficient outrage in the publishing community to prompt defensive action.

"Freelance Journalists Sue California Ahead of Gig Worker Law," read a Hollywood Reporter headline on December 17. The article's lede reports, "The lawsuit, which characterizes Assembly Bill 5 as unconstitutional, was filed by the American Society of Journalists and Authors, Inc. and the National Press Photographers Association."

ASJA president Milton C. Toby said, "We have no choice but to go to court to protect the rights of independent writers and freelance journalists as a whole. He added, "The stakes are too high, and we cannot stand by as our members and our colleagues face ill-conceived and potentially career-ending legislation.”

An ASJA press release warns, "Unconstitutional restrictions on independent journalism may spread beyond California. ASJA is deeply concerned about proposed laws in New York and New Jersey that are inspired by AB5. If necessary, ASJA is prepared to launch more legal action in support of the free speech, free press, and equal protection rights protected by the Constitution."

The organization is wise to attack the California law on constitutional grounds, I believe. For one thing, it takes the matter out of the hands of the State of California. If you read the law in its entirety, you'll see no reason to expect a just or reasonable result from the state's lawmakers.

FARA: Another Looming Threat to Publishers?

This matter also comes on the heels of an entirely different incursion into the First Amendment rights we publishers enjoy. The US Justice Department's law titled the Foreign Agents Registration Act (FARA) now appears to pose a threat to editors and journalists. It also could extend to your advertising department employees who might be involved in preparing native advertising.

Recent government prioritization of FARA places the menacing provisions of that act into new focus. Of particular concern is the threat of a five-year jail sentence for getting crosswise of the act's registration provisions.

We cover the FARA threat in more detail this month in our sister publication, Editors Only. You can find that article here.

William Dunkerley is principal of William Dunkerley Publishing Consultants, www.publishinghelp.com.

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