How U.S. Writers Can Fight AB5 and Save Independent Contractor Jobs
Carol Tice | 83 Comments
Fight to Save Independent Contractor Jobs. Makealivingwriting.com

Fight to Save Independent Contractor Jobs. Makealivingwriting.com.Do new laws spell the end of independent contractor jobs in America — including our freelance-writing jobs?

This is the most frequently asked question I’ve had in the past few months, ever since California’s AB5 bill was passed, followed by similar proposed laws in other states.

If you’ve heard about new freelancer laws, but don’t know quite what’s going on — or wonder what you can do to protect your career and income — this post lays it out for you.

Quick version: New laws are coming online that place restrictions on who can freelance for what sort of company or organization. You need to understand what’s happening, so that you can thrive as a freelance writer.

I’ve got some action items that will help you move forward and stay in control of your freelance future. But first, let’s review what’s happened and why, so you understand the changes, and where your freelance writing biz fits into the picture.

The trouble with freelancers

First off, let’s have a frank discussion about the world of freelancing. In the decades of my working life, we’ve seen a major shift from corporate employment to independent contractor jobs.

Once, freelancing was only something you did out of desperation, while you frantically looked for another full-time job.

But at this point, it’s believed half of all workers are independent contractors. Or maybe it’s 20 percent, or 30 percent.

It depends on who you ask. Statistics are tricky, as some studies count anyone who freelanced once all year, and others only count full-time freelancers.

But the bottom line is that independent contractor income is a meaningful and growing portion of our economy. Some love being freelancers, while others would love to find a job, but can’t.

More freelancers — good or bad?

The truth is, in the freelance economy, fewer people now have employee benefits like:

  • Retirement funds
  • Vacation pay
  • Sick pay
  • Collective bargaining
  • Strike rights
  • Unemployment insurance, and more.

The tax burden shifted off of companies and onto independent contractors…some of whom work ‘off the books’ or under the table, evading taxes.

And it’s created two competing issues:

1. This trend alarms some parties, including labor unions and tax collectors. Also, people who’d love to get an increasingly rare, hard-to-find staff writing job.

2. On the other side of this coin, many of us are thrilled to give up all that to work where and when we want. We’d rather be shot than be trapped in an office cubicle all day, working for The Man.

Things were in a reasonable balance, before the Internet and Google ads threatened newspaper journalism’s survival. Around the same time, a new business model arose that blew up the whole norm of companies having staff, but using a few freelancers on the side.

Along came Uber

When Uber and Lyft began to challenge the taxi-license monopolies, everything shifted. Now, high-flying entities that operated with nearly 100 percent freelancers attracted billions in venture capital money and became publicly traded companies.

Uber Protest. Source: Wiki Commons

Source: Wiki Commons photo by Aaron Parecki

The cabbie conundrum

In the case of these freelance cabbies, drivers were being asked to risk their own vehicle and their lives, taking strangers into their cars for a fare.

That struck many as wrong. As flagrant worker exploitation.

So new laws began to arise to stop all-freelance business models. Despite the current hue-and-cry, the watershed law designed to rein in the spread of freelancing isn’t AB5. Laws began changing back in 2018, with a landmark California supreme court ruling.

Know your ABCs

The rules began to change with a case that challenged an overnight-delivery company’s use of independent-contractor drivers, Dynamex Operations West, Inc. v. Superior Court of Los Angeles.

Independent Contractor Jobs: Dynamex Operations West

Source: Judicata.com

In the past, labor laws let companies tell the IRS and state tax authorites who was an employee, and who an independent contractor.

Often, exploited contractors who worked long-term, onsite contracts and should have been employees unite to sue major corporations and are reclassified, or receive lucrative settlements to cover lost benefits. (With over 50% independent contracts, Google is at risk for such a suit right now.)

The Dynamex ruling took a new viewpoint. It says all workers are employees, unless the company can prove the worker is a contractor.

To help categorize workers, the ruling picked up on a simple set of rules from a Massachusetts labor law from the ’90s.

Known as the ABC rules, they are:

A)  the worker is free from the control and direction of the hiring entity in connection with the performance of the work

(B)  the worker performs work that is outside the usual course of the hiring entity’s business; and

(C)  the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed. There are many facets to qualifying under this standard — including becoming a registered business or LLC, and getting paid by the project, rather than by the hour.

In plain English, you aren’t micromanaged or required to be in your client’s office, your client’s main business isn’t the thing you do, and you have an established business doing this kind of thing, that has multiple clients, not just one.

The IRS has long had A and C as part of its own rules for who’s an employee or a contractor, by the way. The big new monkey wrench is rule B.

Since newspapers, magazines, and many websites primarily create articles, freelance writers for these outlets can’t pass that B test. The law is saying these organizations should only use staff writers.

We all know that’s insane, because today’s struggling print publications and startup online sites can’t afford that. Nor can they get the diversity of voices they want that way.

Crusading for more staff writing jobs

It’s important to note that not all freelance writers and their organizations are unhappy with the idea of making companies use more staff writers. In fact, the National Writers Union is an enthusiastic supporter of AB5 — see them discuss why in this video.

What Writers Should Know About AB5

Posted by National Writers Union on Wednesday, January 22, 2020

Some feel that placing greater limits on use of freelancers will force organizations to hire more staffers and create more well-paid, full-benefit jobs. Which sounds great on paper.

BUT. With the state of print journalism revenue today, that’s likely a pipe dream.

Once Dynamex came down, it fell to the California legislature to decide how that ruling would look in practice. That’s where AB5 comes in.

What AB5 says — and why it created panic

In the wake of Dynamex, California Assembly Bill 5 was passed in Fall 2019, to codify the new labor rules businesses would follow. Key points to know:

  • ABC rules apply. AB5 reiterates the ABC rules as California law, casting doubt on whether freelancers can write for any print or online outlets whose primary business is articles or blog posts.
  • The 35 limit [corrected]. In an industry-specific provision, AB5 says freelance writers can only write a maximum 35 pieces for a client per year. This is a life-altering bombshell for writers creating daily content for websites, and weekly columnists or reporters covering sports and other local events.
  • You must be a ‘professional services’ business to freelance. To operate as an independent contractor, you must have a registered, defined, independent business that contracts for work with your clients. How this is determined is complicated (see the Borello test), but the conventional wisdom is that you should register your business and, ideally, should become an LLC — a step with significant initial and annual costs.

The earthquake for independent contractor jobs

What made AB5 an earthquake for freelancers is its quick rollout. Major labor-law changes would usually have a gradual phase-in, giving everybody time to understand the new rules. Bigger companies might have to comply in year one, smaller ones a year later. (This happened with Seattle’s $15-an-hour minimum wage law, for instance.)

Instead, AB5 took effect for everybody on Jan. 1, 2020, shortly after it was passed. This created a mad scramble to understand and follow the law, by both freelancers and companies.

Vox Media layoffs are just the beginning

That’s the mess we’re in right now, where some California companies are laying off all their freelancers, and even companies based elsewhere (mostly notably Vox Media, which laid off 200 freelancers Jan. 1) are laying off all their California freelancers, out of fear they might run afoul of AB5.

It’s a disaster for many freelancers already, as you can see from reading the busy Facebook pages of the startup organizations Freelancers Against AB5 and California Freelance Writers United, among others.

The American Society of Journalists and Authors (ASJA) is among the professional organizations that are suing the state of California over AB5. The future may hold still more legal changes that affect us as freelancers.

10 action steps for freelance writers

So — what’s a hard-working freelance writer to do, in this time of changing labor laws?

First off, don’t panic. There’s a basic reality that many people love the freedom of freelancing, and don’t want to be corporate drones — and that companies love the savings they get using freelancers. That means some powerful, deep-pocketed parties want freelancing to continue.

But how you operate as an independent contractor is changing. To make sure you keep growing your freelance biz, here are some action items:

1. Prepare for chaos

There’s a lot of confusion out there, especially on the question of whether becoming an LLC will help you keep your clients. (A meeting with California employment officials this week seemed to confirm that being an LLC will not solve the problem if you’re freelance writing for news outlets. It only works for businesses that primarily sell a different product or service than writing. So that’s distressing.)

It’s going to take a while to get sorted. Follow the news on what AB5 means and doesn’t, and educate clients when needed.

Realize that some clients may freak out and get rid of some or all of their freelancers, even though they’re in the clear legally. Don’t fear this, prepare for it by actively marketing for more clients so you have leads coming in, just in case.

2. Don’t assume you’re safe outside CA

While AB5 most immediately affects California-based companies and freelancers, we all know that ideas from the Golden State often roll out nationally. Other states, prominently New York and New Jersey, have already proposed similar laws.

3. Professionalize your business

We’re still getting the full sense of what AB5’s ‘business-to-business’ exception will mean. But consider this your wake-up call to stop working under the table. It appears that’s not going to be a good future option.

Register your business with your state and city, even if it’s as a sole proprietor, but ideally as an LLC (cheapest route will likely be a legal site such as LegalZoom).

Get a federal EIN number — it’s free (but make sure you’re on the legit IRS site for that, and beware of scam sites). These moves help convince IRS to allow your freelance deductions.

Yes, there are costs to this. Remember to charge more to cover them.

Besides potentially gaining a larger client base (big companies and government agencies like to hire LLCs), being a registered business has many benefits. You can write business expenses off your taxes, build a Social Security fund for yourself, and contribute to the welfare of society, keeping our roads, police, fire, and other services running.

4. Consider partnering

If there are 52 weeks in the year and you’re a weekly columnist, do the math — maybe you could split a column with another journalist and each write 26 items? Would be better than nothing, while we work to amend the 35-article limit.

Yes, this assumes the client is willing to work with you as long as you’re under that figure. Weirdly, chatter on the anti-AB5 Facebook boards indicates some news outlets are continuing to use freelancers, but don’t want to exceed that limit.

5. Diversify to survive

If you’ve been doing nothing but local sports coverage, realize you need fingers in more pies. Weekly coverage of local activities is square in the sights of AB5, and it’s unlikely newspapers will do as AB5 drafters hope and make you a staff writer.

It’s time to reinvent yourself — and really was anyway, because these sorts of local-coverage gigs always paid too little.

6. Don’t take onsite contracts

If a company asks you to come work in their office to write, even for a few months, beware. AB5 makes it very clear that you can’t be considered an independent contractor if you work onsite.

These are often full-time jobs in disguise, the exact type of freelance gig that AB5 aims to reclassify. Tell them that doesn’t comply with the law, and you need to work at home to keep your freelance status.

7. Push back on non-competes

Now more than ever, writers can’t sign contracts that forbid them to write for competitors. Having many clients you write fewer than 35 pieces per year for is the only way to survive and still comply with AB5.

Noncompete clauses have always been illegal (they violate FTC rules on restraint of trade) — now, they’re completely untenable.

8. Get creative on contracts

Don’t know if I’m crazy, but what occurred to me immediately when I learned of AB5 is that if you want to freelance, and a company wants to hire you…how you structure your contract is up to the two parties.

Couldn’t it appear on an invoice that 4 pieces you write in a month are part of a single project, for instance? Don’t know what’s stopping us from just billing once a month for ‘services’ without defining how many pieces we wrote.

Not that I’m telling you to do anything illegal or anything <cough>. But likely enforcement will focus on some of the largest news outlets…and many others will skate under the radar. Just a thought.

Also, don’t assume all your clients will immediately freak out and blow up their contractor model. Some writers are reporting that current contracts clearly don’t comply with AB5, and their clients don’t seem to care.

Some companies may do business as they have, until sued. For most companies, that will likely be never, as enforcement tends to focus on the most high-profile offenders. Look for companies that have an independent streak — they may be your best freelance opportunities in future.

9. Focus on business writing

One thing AB5 makes clear: If you register your business, and freelance for companies that offer some other main product or service than writing… you’re in the clear. If you blog for a plumbing company, or write white papers for a financial-services consulting firm, there’s no issue.

The journalist in me weeps to say that, because we’ve never needed independent reporting and a strong news media more than we do right now. But until this gets sorted out, tread carefully when you contract with news agencies.

And let’s hope more staff-writing jobs are in the offing. Vox did create 20 new part- and full-time staff positions, after its layoffs.

10. Join the fight

If you’re angered by the restraints on freelancing posed by AB5, fight back! Two organizations’ Facebook pages were mentioned above, and there are many more. Another good group to know is Fight for Freelancers NJ, which has successfully defeated a proposed AB5-like bill in their state.

AB5 doesn’t just affect writers, so protest coalitions are being built across industries. Though doctors and a few other categories of professionals are exempt, affected categories include translators, truck drivers, actors, designers, and many more.

While writers grapple to understand how to comply, there are growing movements to amend AB5 to exempt creatives (here’s a petition by musicians, for instance), and to repeal it altogether.

Join the movement to preserve our freelance freedom. Organize. Lobby. Write. Call. Tell your story. Don’t just sit back and let legislators take away your way of life.

Independent contractor jobs will survive

With all these changes, it’s up to us to find the freelance writing situations that still work. And to advocate for laws that allow us our freedom. I believe we can have that, while still supporting the need for the Fourth Estate in our society and pushing back against all-contractor business models such as Uber’s, which clearly exploit workers in dangerous working conditions.

The changes going on now may feel scary and overwhelming, but labor law is always changing. Stay informed, and consult an attorney if you feel you need advice.

Don’t freak out and give up. Freelance writing isn’t going away — too many companies benefit, and too many of us love the freelance lifestyle. Independent contractor jobs will survive this.

What’s your take on AB5? Leave a comment and let’s discuss.

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83 comments on “How U.S. Writers Can Fight AB5 and Save Independent Contractor Jobs

  1. Linda Hamilton on

    I’m a California- based freelance writer restarting my business. I became aware of AB5 just as it started and am now to the point it’s impacting my restart. I’m all for diversifying my writing niches and clients. And I’m aware enough contractors moved enforce to get AB5 on our November 2020 ballot. But it sounds as though the November vote may only influence Uber and Lyft drivers.
    I am, however, connecting with an attorney to become an LLC, already filed my business with the state and need to renew said license since it expired while I was on hiatus, and I do have a website that’s been up for over 10 years.
    Hopefully all this is enough to have fewer issues with prospective new clients and get independent contractor work coming in soon. Will be talking to an attorney soon to ensure I’m up to snuff legally to prevent issues.
    Thanks for this past Carol. AB5 is complicated and will affect some who aren’t expecting it.

    Reply
    • Carol Tice on

      Believe it’s already impacting writers everywhere, because some California companies have simply ceased using freelancers AT ALL, from anywhere, while they get legal advice on how to be sure they’re complying with this law.

      Reply
  2. Chris on

    Hi Carol,
    Thanks for the article. I’ve been reading the law, and it doesn’t define an employee as “someone who has to sit in an office” or “someone who must be employed X number of hours.” It seems like that is your understanding of it. The PR that Uber and Lyft are putting out says the same thing: what’s really at stake is one’s ability to set their own hours. That’s not accurate, rather the law states that employers have to offer workers’ comp insurance and other legally required employee protections, and pay minimum wage. There’s nothing in the law about hours or location of work.

    Reply
    • Carol Tice on

      Chris, IRS’ rules on contractors have long stated that contractors do work in their own locale using their own tools. Employers have always had to do those things… and obviously they don’t have to sit in an office, if they’re trying to get Uber drivers classified as employees with this law! And Uber drivers set their own hours. So that’s not it, either. The question is whether someone can work regularly and part-time, in a flexible way, with their own equipment (car), but if what they do is core to the business, they still must be an employee. As AB5 states.

      What we’ve all seen with AB5 is it’s so hard to define what we’re against, and what we want to allow. I gather there’s action on this and revised laws proposed… so we’ll see where this shakes out. I gather arts organizations, conductors, musicians, photographers and more are all up in arms and are seeing jobs end due to the law. Hopefully, we’ll soon see this going a better way.

      This sort of reminds me of when I used to live on an island, and they wanted to ban fast-food chain restaurants. They tried and tried to draft a law that would exclude them, but not discourage retail generally, and in the end, they couldn’t come up with a law that would get it done. They tried banning ‘restaurants where workers have to wear a uniform,’ but plenty of mom and pops do that also. And so it goes. Island has a McDonald’s, Subway and more today.

      Reply
  3. Sydney Clinton on

    Thanks Carol for the survival tips. The rule B is the most absurd thing I’ve heard. In today’s dynamic world, diversity of thoughts and ideas is key to winning the competition and that can only come from freelancers who are out there and not staffers in cubicles.

    Reply
    • Carol Tice on

      That’s not really what rule B is saying, that all freelancers would have to be staffers. This is the rule aimed at the heart of Uber’s business model, that you not hire as freelancers a type of worker that does the main activity of your business. Hire a plumber to fix your pipes at your tech business, sure. Hire a copywriter for your tech business, sure. Hire all freelance cab drivers at your cab company… no.

      I think a lot of us agree that what Uber is doing exploits workers and puts them at risk of harm without the protections they deserve. The problem is when you apply that to journalism, you have big problems, as newspapers have always relied on a mix of staff and many stringers who work very part-time, and under no other stricture of hours worked could they be considered staffers.

      I gather there are a raft of proposed bills aimed at modifying AB5 and the CA legislative session begins soon, so we’re hoping for some fast action that shows understanding of how newspapers and magazines must operate to offer diverse voices and reportage and bring truths to light.

      Reply
  4. Sayed on

    I am not clear what this law actually means for international freelancers. If an American client (for example, a tech startup) hires a writer from Asia, that means he is outsourcing some tasks overseas. Does AB5 affect this? What is the current state of the U.S. laws about outsourcing writing projects outside America?

    Reply
  5. Vicky Cox on

    Carol, not sure how I’m only just now coming across this article but THANK YOU! As a CA resident just getting back into freelancing, this has been so helpful. I read the posts in the Freelancers Against AB5 FB group about how so many people (artists, musicians, etc) have had their businesses destroyed by AB5 and it makes me nervous. However, I spent the first 3 decades of my career as a real estate appraiser and saw major changes in our industry, too. We adapted and in many ways, became better. I try to remember these lessons here, too. And, I’m going to set up and LLC as soon as I start making some money.

    Reply
  6. Samantha on

    Thank you so much for this informative article. I’d heard about AB5 in the fall (I’m a CA-based freelancer), but then forgot about it – this brought it back to the forefront for me – thank you! I read your post and realized I needed to go ahead and get set up as an LLC; and then literally the day after your post, I got an email from a client trying to process an invoice of mine. Guess what they also needed (in addition to my W-9 and my invoice) – a new questionnaire they’re requiring to determine whether their vendors are appropriately classified as independent contractors. It seriously read like it was written straight from the law – “Are you paid by the project or hour? Do you control your own work hours?” etc. Another client of mine – that I’ve worked with for years – also recently emailed to confirm I’m an LLC. They have never once asked that!

    I don’t typically work with media organizations (the clients I mentioned are both colleges/universities), so I don’t have that aspect to be concerned about but I do think even those of us not working with media organizations would be well-served to form an LLC and further professionalize our services, as you stated. I sent in my articles of organization to the state today, so thank you for the kick in the rear!

    Reply
    • Carol Tice on

      The other thing I’m hearing is: Have a writer website. It appears that may be emerging as another ‘screen’ that shows you really ARE in business for yourself, and are not a misclassified employee.

      Reply
  7. Amy Cardris on

    Thank you for this excellent explanation! One thing we can always count on is change. I hope future laws consider potential harm to freelancers while protecting exploited workers.

    Reply
    • Carol Tice on

      That’s the balance I’m hoping to see, Amy. It’s fascinating to see these laws come down that freelancers HATE, when they are supposedly for our ‘protection.’ No one seems to have included freelancers at the table when this was being drafted, to determine just who needed protecting, and who wanted to be free to continue as they have.

      Reply
  8. M. R. Shupp on

    Thank you so much for writing this explanation and how to stay compliant! What resources do you suggest following to keep in the know regarding freelance laws and changes?

    Reply
  9. Judy Kopulos on

    You’re so right. It’s much easier for governments to go after small businesses, because we don’t have time or money to fight these issues.

    Reply
  10. Judy Kopulos on

    Eye opening article–THANK YOU! I believe this to be unconstitutional, depriving millions of making a living. I will be doing what I can to fight these kinds of laws.

    Reply
  11. Jeannie Michael on

    Thanks for this excellent run-down of what’s changing and what we should do about it. This of course is one of the reasons you make the big bucks – and earn them, by golly. We should all endeavor to emulate!

    Reply
    • Carol Tice on

      Maybe not YET — but remember other states are looking to create versions of this law — and there’s a national law coming to a vote NEXT WEEK, I hear, that is also similar. Stay tuned!

      Reply
  12. Kat Pachas on

    Thank you for not joining the ‘freak out‘ mode and taking the time to lay out the facts and put out some strategies to make income while the new laws may change and shift how freelancing works. I also appreciate that you didn’t sugar coat the current climate and what new laws could mean for the freelance community, even outside of California. This article was so informative and much appreciated! Most of life and work in any arena these days seems to be how to evolve and grow and roll with the punches.

    Reply
    • Carol Tice on

      Glad you found this post useful, Kat! And yes… I wish more freelancers understood that change was ALWAYS our norm. Always need to be thinking 2 steps ahead.

      I have an exercise I do with my coaching students where I ask them to envision their business 5 years from now — who would the ideal clients be, if you built your business successfully? And most have never thought about it before. Gotta take time to think about where your career is going, and how you plan to get there. And to plan for disruption! Even without this we’ve got #recession2020 or 21 for sure, is the forecast. Successful freelancers need to know how to be agile and shift with the tides.

      Reply
  13. Paulette on

    Thank you for the information, Carol. I wasn’t aware of AB5.
    Maybe California should become a separate country. I’m just saying…

    Reply
    • Linda H on

      Paulette, I’m from California. This state has often and continues to consider seceding from the Union and becoming a separate Republic. It’s been argued multiple times in our Assembly and is a hot topic among pundits. At present the state is in such a mess it likely won’t be discussed again until next year.

      Reply
      • Paulette on

        Hi Linda: Thank you for your response.

        I am curious about California. What exactly is it that California wants? Why are they so unhappy with the U.S.? I’m not saying the U.S. is perfect but it is the best country on the planet, in my humble opinion.
        In this response column alone, comments are made that California has lost a lot of businesses. This is nothing new. Is that what California wants?
        This is an extremely complicated topic, but I would like to learn at least a little more about the California mindset, as well as the percentage of the population that wants to split from the country.

        Paulette

        Reply
        • Linda H on

          Hi Paulette,
          Not sure this is the place to discuss this but, not all Californians want to split from the Union. That’s reflected by the huge mass exodus from the state in the past decade. Our mass exodus is because for years we’ve had Democratic governors who have taxed and overtaxed business and individuals to the point companies are leaving en mass because of taxes. I recall several years ago a major waste management company clearly told the Assembly if they passed a certain tax bill on business they would move to Texas. The Assembly did pass the law, and the company did leave the next day to the tune of taking $5 million in tax revenue out of the state. It didn’t seem to matter except to the community where it hit hardest. I was laid off in 2010 because the company I worked for pulled out of California and began their exodus in 2010 culminating in 2018.

          As for seceding, it’s mostly ignorance from the liberal political class in California. According to an piece written by Arthur Majoor in 2019, and reiterated by local newspaper op-eds, many believe because we state we are the fifth largest economy in the US many believe we can stand alone. But we can’t. As talk of a secession continued, discussion opened about splitting California into three parts, each standing on its own. But that’s not possible either. We can’t afford to by water to supply SoCal despite the water coming from the Coastal, Sierra Nevada and Shasta ranges. Our economy is wealthy because we’re within the largest world economy. Without the federal government with us California would fall apart. The Progressive party members believe they would benefit by seceding, but many Californians wouldn’t support it. Most in favor of it aren’t thinking it though. Majoor’s piece showed politicians considered dividing the state into six separate parts, but each part would fail without the others and our economy would tank.
          I’ve seen multiple articles about California missing federal deadlines providing funding needed for our state programs. Many of our related programs would tank.
          Mostly secession is a political ploy to get the Federal government to provide more economic and political benefits to the state but in the long run, it would all backfire and our economy and politics would crash and burn. That’s what everyone is opposed to. Those in favor of it like the free programs, free benefits, not realizing those would disappear if we split.
          AB5 is part of the political ploy to rebuild our economy by taxing people. The problem is that this bill has caused more businesses to consider moving or closing, more people are leaving, and our tax dollars aren’t growing. Many of us believe that before long the only residents in California will be illegals, immigrants, and people who work for the State. Everyone else will leave. I’m even considering it after living here over 40 years. AB5 is just another piece in the quagmire of government chaos that has damaged the state and made leaving more inviting than staying, in my opinion and that of many people I know.

          Reply
          • Paulette on

            Hello Linda: Thank you so much for the excellent information and “big picture” of California.

            I apologize to Carol for opening up this topic as it is not part of the AB 5 thread.

            My desire to know what is really happening caused me to ask for an explanation. Your detailed response answered my questions.

            I thank you.

            Paulette

        • Carol Tice on

          Yeah, we can’t answer THIS in blog comments… but I spent my first 35 years there. CA does like to be progressive and in the vanguard, and they wanted to abolish Uber and Lyft, or make them hire FT drivers and treat them fairly. Out of that desire has spiraled a very messed up bill that is destroying many creatives’ livelihoods. Hoping there WILL be a fix, that gets this back to the original intent.

          Reply
          • Linda H on

            The bill originated from disgruntled unions, such as taxis. Won’t got into it, but this is more about unions lobbying against independent contractors and losing money.
            Learning about AB5 and the information you’ve provided to protect ourselves has been extremely helpful. Many freelancers aren’t aware of these changes, I know several who have no clue.

  14. Elizabeth Hansen on

    This is the best piece I’ve read on AB5. Thank you. (You might want to change a couple of 36s to 35s just for accuracy.)

    Reply
  15. Tracy Hume on

    Thank you for this outstanding explanation of what’s happening with this law and others like it. As always, you have a knack for getting right to the heart of the matter. Do you have any other resources on your suggested Point #7 “Push back on non-competes”? Have you written a blog post on this specific topic in the past that would be helpful? Or do you have a link to more info about the FTC restraint of trade issue you mentioned? One of my long-time clients recently wanted to (retroactively) enact a very broad, untenable non-compete restriction on me and our conversation about that did not go well. I may be done working for that client. I would like to be better prepared for that conversation when it comes up again in the future. Thanks so much!

    Reply
  16. Michael on

    Regardless of political affiliation, politicians and the IRS have long disliked independent contractors, freelancers, and small businesses because it’s too difficult to ensure the “little guys” are following all the rules and paying what the IRS thinks they should pay. Think of all the tax auditors the IRS would need to hire. Speaking of which, the IRS shouldn’t be able to contract with auditors, either. Am I right?

    It’s much easier for the government to go after small business’ lifelines – a relatively “small” number of big companies – than it is to chase down all the small businesses to ensure they comply. Even supposedly pro-business Republicans like Newt Gingrich are on record as saying they want fewer small businesses. We don’t grease political skids like big companies do, so politicians could care less about small business and individual taxpayers.

    Reply
    • Carol Tice on

      Think that’s all true, Michael. And these days in politics, so many leaders seem to be billionaires that they’re far removed from the realities of freelance and small-biz life. Hence the pronouncement that newspapers should simply beef up their staffs and stop using freelancers. When the AP has been using stringers probably since about 1900. Deeply out of touch.

      I think the IRS does NOT have contractors… but if they do, that’s so ironic. And as you say, it’s more work to monitor if millions of freelancers are paying up.

      On one of the Facebook anti-AB5 boards, I encountered someone who said pointedly that he only works cash under the table. I’m sure more freelancers than we expect are engaged in this — they don’t freelance a lot and probably don’t have the vision that they’re in ‘business’ and have tax responsibilities. Doing it for pocket money, perhaps it doesn’t ring a bell that you owe tax on that odd $700 writing project you did.

      It’s definitely easier for IRS to audit Microsoft and fine them $100 million — think of how many freelancer audits they’d have to do, where they found wrongdoing and levied fines, back taxes and penalties, to make that sum for the agency? Just simple math to target the biggies. Watch out, Google!

      Reply
      • Linda H on

        I recently read an article that California is prepared to hire over 5,000 tax auditors to handle in-depth investigations on businesses and residents should a certain tax law be repealed in our March 3 election. 2019 showed the biggest exodus of businesses and individuals from California since the 1950s. Without those tax dollars, the state is hurting, so Governor Newsom (who is Nancy Pelosi’s nephew, as a political tidbit) is seriously looking at enforcing multiple tax-related laws. He was in favor of AB5 and it was approved upon party lines in September 2019. That said, regardless of how much work looks involved in enforcing the bill California is preparing to do just that as it progresses toward enforcement. Multiple companies are suing the state to repeal it because of the damage and hurt it’s doing toward companies other than Google.

        I may not be affected by it because I’m not able to work much just yet due to health. But I’m looking for an attorney as you suggested to discuss what will be coming forth. Another author friend of mine is also looking as she writes books and needs to know how it impacts her book sales to multiple stores.

        From what I’m reading I believe it will be enforced, even for the little guy, as the California Franchise Tax Board begins investigations into writing businesses and freelancers. It will take a while, but the massive exodus of so many is driving it. While it seems difficult to enforce, this is California–we’re known for doing what seems impossible.

        Reply
      • Michael on

        I know that the IRS hires people during tax season to help taxpayers with their taxes. I don’t know how these people are classified for work purposes.

        I wonder if AB5 has the potential to disrupt contract employment firms that provide workers to companies. For example, the IT space is huge and one I’ve worked in and around for years. Tons of contract firms exist to serve this market. For the purposes of work, contactors become temporary W2 employees of these firms, which in my mind is a dodge of the freelancer status the IRS allows these companies.

        This law has to be a non-starter. It has the potential to hurt so many businesses in so many industries. On a personal note, I’d love to see many of these Asian IT recruiting firms have to exit the US because of AB5. On the other hand, AB5 could further force Asian IT workers to move to Canada to work and fuel more American companies to set up Canadian offices to employ these folks. Just another example of potential unintended consequences of ill-thought-through actions.

        Reply
        • Carol Tice on

          Michael, it DOES have that effect. Just heard from a woman who ran a business that provided contract cafeteria workers to schools, and now she is out of business. She’d have to hire all her workers as her full-time employees, under AB5, which given the low hours isn’t realistic. As you note, there are many unintended consequences spinning out of this bill, and we’re just at the starting gate. Many companies are still either ignoring it or completely confused about their responsibilities, to this point. Lots to be ironed out!

          Reply
          • Janet Stotler on

            Sorry AB5 does not require that anyone be hired full time. They are just required to be treated as EE’s. Cafeteria lady just doesn’t want to pay the employer taxes and the workers comp these people deserve.

          • Janet Stotler on

            I stand by my original statement. The staff are employees. Just part time employees. No one is saying these people would be full time employees. AB5 certainly doesn’t. You are spreading misinformation.

            These people are not in business for themselves, they can’t make a “profit”. They don’t even meet the IRS rules for independent contractors!

            BTW, I am an enrolled agent who does payroll and 1099’s. Not some layperson!

          • Carol Tice on

            Right, but the cafeteria company owner’s point was that there was no way she could take on the tax burden of having 10-hr a week workers classified as employees, as their work is all so low paid. So it was a non-starter for her. Certainly there ARE part-time employees, that’s a category, but I know many arts organizations and others are in no position to make every guest violinist or whatever into an employee. Groups and small companies are moving out of state and closing their doors, is the actual result of AB5… which is why we are all anxiously awaiting its amendment.

          • Janet Stotler on

            Yes but she doesn’t even meet the Federal requirements unless that is industry standard for what she is doing. Anytime you have a business the Govt is your silent partner. If you can’t afford to run your business in a legal fashion you shouldn’t be in business. And what about all her low income workers who are paying double the Social Security and Medicare they should be. She is taking advantage of them!

  17. Bridget on

    Thank you so much for this clear, comprehensive article. I generally don’t write for news outlets, but it’s good to have all the facts. I feel so much better informed now!

    Reply
  18. Jennifer on

    This is In response to an answer to another comment. What I am taking from this is that majority freelance jobs could now basically go overseas since only impact Americans? And probably cheaper for company rather than creating “ jobs” ( If even sustainable wages anyway). And smaller non-profits will be impacted as very challenging to get grants for wages/position but freelance copy /design etc… can often fit under other categories.

    Reply
    • Carol Tice on

      I DO think that’s a concern, Jennifer — how will IRS or CA track if a company based in the state simply hires all Indians of Filipinos? This could backfire big time and lead to more overseas job loss, instead of more full-benefit American jobs. We’ll see how companies react.

      Reply
    • Carol Tice on

      You’re welcome! Yes, this was a big research project — which is why it took nearly a month from AB5 taking effect for me to get it out there. Hopefully, it’s worth the wait to have time to assess how it’s starting to play out and what freelancers are doing in response.

      Let’s hope soon there’s an update with more rational rules for freelance writers!

      Reply
  19. Linda H on

    Thank you for these details Carol. As a California-based freelance writer who is returning to work after a 3-year hiatus I’m looking at all aspects of AB5 and how to market myself and update write my website and LinkedIn content. I’m changing genres and entering into this unique quagmire, but you’ve given me many ideas and mentioned many needs. I’ll be reviewing all aspects of your post. I’ve already got great ideas on what I can do to prevent issues and reassure new clients that I’m a great add to their team. This should be interesting, but most certainly it will be fun!

    Reply
  20. Sayed on

    There are many sites that pay for guest posts/freelance contributions. Such sites are often be listed on makealivingwriting blog. Will these sites affected by this law? Also, let me know whether this law makes any problem for writers outside of the US or not. (And do these sites accept writers from abroad?) There is not much opportunity in my country, in terms of freelance writing. I have to depend on the first world.

    Reply
    • Carol Tice on

      Good question — Sayed, in general, if you’re doing a 1-off guest post, none of this is going to be relevant. And lucky you, these U.S. laws have no bearing on overseas writers, as they pertain to collecting taxes on Americans and American corporations.

      Reply
  21. Cevia on

    I am so appreciative for this clear and concise analysis of the state of freelancing in the face of AB5. Thank you for providing this guidance and leadership, Carol.

    Reply
  22. DKendra Francesco on

    The cap to remain an independent contractor/ freelancer is 35 submissions per client per year. At the 36th article for the same client in the same year, you’re now [supposed to be] treated like an employee.

    Reply
  23. Bonnie Juettner on

    I agree 100% with your point about getting creative with contracts–except that honestly, I also don’t know how the government would EVER know how many pieces you wrote. I have NEVER been asked to include my contracts as an addendum with my taxes, for example.
    To enforce a law like this, there has to be paperwork. You can’t penalize someone for something you don’t know about. Lawyers know this but sometimes I wonder if politicians do.

    Reply
    • Carol Tice on

      Agree totally — which is why I brought it up. How would state tax authorities know how many articles I wrote? Are they going to read every publication there is and scan all the bylines? What does enforcement look like, is it even enforceable, even if upheld? Many questions remain to be answered.

      Reply
      • rl crabb on

        In the case of newspapers, there are probably readers who would track articles of writers who publish opinions they disagree with. In this partisan environment, it would not surprise me.

        Reply
        • Carol Tice on

          Readers… but not tax auditors. Is the point. There would have to be a huge amount of oversight on this, at a time when tax budgets are being slashed. Seems nuts…

          If California has to hire 5000 more tax auditors to enforce AB5 (see Linda H’s comment), the cost of that would likely defeat its purpose. I’m hoping for amendment to focus this bill on its intended Uber/Lyft type targets. (Hearing repeal is a non-starter.) Reading heartbreaking stories about little theater productions closing, church soloists being fired and more! This touches 100s of categories of employment.

          Reply
          • Linda H on

            Many of the small businesses are closing not necessarily because of AB5 but because the minimum wage also went up to $20/hr. A number of small businesses in Sacramento closed down January 31 because they cannot pay the associated employment taxes and minimum wage mandated. I saw at least five small downtown shops/cafes closing because the owners couldn’t afford minimum wage. So add the combination of AB5 with minimum wage and small businesses cannot compete. Many other businesses simply cut hours. I have a number of friends who lost hours and now have trouble surviving because their hours are cut although minimum wage is paid. The government is shooting itself in the foot. They may change things to correct some errors but the damage is done to the individual who lost work, can’t work with Lyft or Uber any longer because they lost flexibility. Many aren’t on Facebook writing about it. It’s sad but it’s happening. As a former resume writer I’m connecting with a national resume writer with a tribe asking how it will affect resume contractors working with other agencies. Resume writers write much more than 34 projects a month for these contractors.

    • DKendra Francesco on

      If I’m not mistaken, it’s tied in w/ the 1099s freelancers receive. Each business who uses freelancers has a record of who did what and when and how many, hence knowing how much a freelancer earned. An audit would turn that up in just a few days.

      Reply
      • Bonnie Juettner on

        DKendra, yes and no. I really think that’s unlikely. The records that the IRS looks at are financial. Not that they couldn’t or wouldn’t look at a writer’s contracts–they could and very well might–but they also have to consider the time it takes to do so, and the fact that often writers don’t end up doing the exact amount of work that is in the contract, and often don’t even HAVE a contract, in which case, they would have to–what? drill down into emails to try to nail down how many pieces were written? And is there a definition of what constitutes a piece? If I write a caption for a photo, is that one piece or does a whole batch of captions constitute one piece? Lawyers will have a field day with this if it reaches that point.

        Moreover, who is going to do this particular piece of the audit? The IRS and state tax agencies won’t care about this law. They just want the taxes. So will there be a separate agency tasked with spot-checking files on freelancers? Will that agency get access to IRS files? That will get fought hard by people, including corporations, who don’t want their tax privacy compromised, so my guess is no). Has California provided funding for such spot checks? (Again my guess is no.)

        Also, I don’t receive 1099s for all the work I do. I do report every penny of it, even when I get paid in cash, for many reasons. But I don’t get 1099s from my clients outside the country, for example, and I also have done textbook work for a company (which shall go unnamed!) that told me the particular work they outsourced to me is from a publisher that doesn’t 1099 its freelancers. I was shocked, but I don’t really care, because I’m reporting the income anyway. And there’s also a threshold below which you’re not required to send a 1099. That threshold might not apply to all the freelancers who are charging more thanks to Carol (thanks, Carol!), but there are still lots of freelancers out there who are regularly getting paid an amount that isn’t 1099ed. (I can’t believe I’m using 1099 as a verb.)

        I don’t think this legislation is even meant to be enforced. I think it’s meant to scare. It’s pure politics. It reminds me a lot of other scare-tactic laws that have been proposed in the past purely to scare people (“new regulations mean that soon you won’t be able to buy vitamins!” and the like). But, I could certainly be wrong. This one actually did get passed, and that alone makes it different.

        Reply
        • Carol Tice on

          I disagree — think it WAS meant to be law, but was poorly written by legislators who lack understanding of the challenges of journalism and freelance writing today. It’s primary purpose was to attack the Uber model, but it expanded into a mess.

          Recent reportage has brought forward that IRS’s budget has been slashed (perhaps 45 doesn’t want his cronies audited), and so few audits are currently happening. Which raises questions about whether companies could just continue as they have… but some companies clearly don’t want to take that risk, however slight, and are acting to change their freelancer model now.

          Thanks for weighing in on this!

          Reply
  24. John Soares on

    Excellent explanation of all the key variables, Carol. I think I’m in the clear for now, but I’ll keep watching this situation. I do write for clients in California, but they are various types of businesses and nonprofits, not news outlets.

    Reply
  25. Jessica Springer on

    Hi Carol, thank you for writing about this. A couple of things:

    1) The freelance article limit is actually 35, not 36 pieces. At 36, a client has to either hire you or drop you if you can’t find a way to qualify for one of the exemptions in the law.

    2) There is, unfortunately, a national version of this waiting in the wings. HR2474 looks like it is supposed to protect the rights of those who want to be in unions, but it applies the ABC test nationally, and it also tries to get rid of right-to-work laws, which won’t sit well in many states. (I’ve noticed a number of people confusing right-to-work with at-will employment, by the way; for those reading this, remember that right-to-work involves not having to pay fees to a union you don’t want to be in.)

    AB5 and its ilk are meant for the work world of the 1930s, not the 2020s, and it is too convoluted to apply now. Even the California Chamber of Commerce has pointed out that the business-to-business exemption is “virtually inoperable.” (I’m not sure if I can post a link in the comments, but look up the story “Oh, What a Relief It Isn’t – AB 5 and the B2B Exemption” from Capitol Insider.)

    Thank you again for spotlighting this!

    Reply
    • Carol Tice on

      Totally agree with you — thanks for the correction! Going to fix in the story.

      Had not turned up the national proposal — but I would think that’ll be dead in the water, because right-to-work states DO love their setup.

      Reply
  26. Bob Phillips on

    This was an eye-opener for me, being a freelancer for just three months. Thank you for explaining it clearly and advising on action steps to be taken. I’ll take heed.

    Reply
  27. Jessica Brown on

    Thank you for addressing this, Carol! I’ve been following AB5 with some trepidation, but have found all the exceptions and details pretty confusing, so I appreciate you breaking it down for us.

    Reply
    • Carol Tice on

      What’s confusing is a law has been implemented and NOBODY REALLY UNDERSTANDS how it works for them. The rules are complex and possibly conflicting with each other, particularly on whether being an LLC means question B is no longer relevant. CAN journalists be an LLC and write for the L.A. Times freelance?

      After a forum yesterday, it appears the answer is no…but I think more will be clarified as we go here.

      Reply
  28. ProCopyCat on

    Thanks for this information! But I’m still confused. I own and manage a boutique content and digital marketing agency. I use freelance writers. Do this apply to my business? Are my writers subject to the 36 submission limit if they are based in CA?

    Reply
    • Carol Tice on

      I don’t usually allow posts by people who don’t use real names, Pro, but making an exception because your question is important. And the answer is: I don’t know! Where are you based? What is your primary line of work?

      If you are in CA or use CA freelancers, I’d be consulting an attorney to understand my responsibilities. I know the feeling among activists is that pressure is on to suspend this law until it’s clarified, so watch for updates.

      Reply
    • Carol Tice on

      It’s heartening that activists in NJ defeated their bill. I think more thought needs to go into how to fight the Uber model, without devastating literally dozens of other professions!

      Reply

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