Freelance Fight Goes National: Must-Know Info on The ABC Test - Make a Living Writing

Freelance Fight Goes National: Must-Know Info on The ABC Test

Carol Tice | 34 Comments
What's the ABC Test? Freelance Fight Ahead

Do you know your ABCs? As a writer, you probably think you do. But if you’re an American freelance writer, the ABC Test is something else altogether.

If the ABC Test becomes federal law, it could destroy the livelihoods of freelance journalists across the country. Along with the careers of many other types of freelancers, too. Everyone from real-estate appraisers to cafeteria ladies.

Yes, there’s a very real threat to American freelancing coming — and now is the time to organize to defeat it.

To understand what’s happening and how to preserve our freelance lifestyle, I need to give you a little background on similar state laws. Activists have learned a lot from wins and losses there that they plan to use in fighting similar, national legislation.

I also outline below what you can do to help preserve independent reporting and the free press.

It’s an important issue not just for those of us who freelance for newspapers and magazines. It matters for all of us who rely on independent reporting to stay informed, and who want workers to have the flexibility to run our own home-based businesses.

Read on to learn the ABCs of freelance law, and the legal proposal that could change everything.

Meet the PRO Act

For starters, let me introduce you to the proposed labor law that’s part of President-elect Joseph R. Biden’s platform: It’s known as The PRO Act (Stands for ‘Protecting the Right to Organize).

True, it’s not one of Biden’s stated top-four priorities (the economy, COVID-19, racial justice and climate change). But Biden has strong ties to labor, his nominated Labor Secretary is a former union president, and unions have been big Biden supporters.

So expect The PRO Act to pop up on the agenda sooner than later.

The point of the bill began as strengthening the right of workers to organize and unionize. But a definition of who’s a freelancer and who’s a contractor was added to the bill as well. Luckily, you don’t have to wade through reams of legalese to get to the big problem for freelancers: The ABC Test it contains that is the proposed federal definition.

It’s right on the first page. Here’s a screenshot:

Pro Act language
If you’re a copywriter, you should be OK here. You’re writing for a widget maker, and their primary product isn’t marketing copy. It’s widgets.

But that point “B” of the ABC Test poses a barrier to any freelancer writing for a publication. Articles are the core, ‘usual’ business of that employer. If you’re writing articles for them as a freelancer, you flunk the ABC Test.

Does an LLC help?

There’s a rumor going around that if you incorporate your freelance business as an LLC or corporation, you get a pass on the ABC test. But it’s not true, says Kim Kavin, a longtime freelance journalist and a co-founder of the activist group Fight For Freelancers USA.

If you flunk any of the items in ABC, you can’t freelance for that client. Your corporate form doesn’t help.

ABC vs IRS

If you’re wondering, this ABC test for who’s an employee and who’s a contractor dates from the 1930s. There’s a more recent test for telling freelancers from employees that dates from the 1980s, and it was created by the Internal Revenue Service.

It’s been being used for tax purposes for decades — and freelancers feel it’s the rule that should be used in The PRO Act, instead of the ABC Test.

In essence, the IRS rule says independent contractors have multiple clients, and do work on their own schedule, at their own place of business, with their own tools. It’s a simple definition that’s served to clarify freelancing for decades, in tax filings.

Then, along came Uber and Lyft, and an increased focus on the ‘gig economy.’

Unions soon pointed out that it could be considered worker exploitation for drivers to risk their lives — letting strangers get into their cars which might also crash and injure them — without even the protections full-time employees enjoy, such as paid healthcare. (Though the drivers themselves said they prefer to stay freelance.)

Lawmakers started looking for ways to compel the app-based companies to make their drivers into employees, and the ABC Test reared its ugly head. (Read on below for how that worked out in California.)

Something you may have missed: The PRO Act already passed the U.S. House of Representatives, nearly a year ago. With a Republican-controlled Senate, however, the bill stalled didn’t become law.

Now that Democrats control both houses and we have a Democratic incoming president, The PRO Act is back on the table for 2021. If you’re someone who’s been dancing for joy at the turnabout in party control of the U.S. government… here’s the dark side.

How can freelancers fight the ABC Test and get the PRO Act amended, so it’s fair to freelancers? The history of similar state laws gives us the answer.

States vs the gig economy

Three states have put forward labor laws with the ABC Test as their guide: California, New Jersey, and New York.

California’s Assembly Bill AB5, passed in September 2019, hit most freelancers out of the blue. It wasn’t publicly debated, and implementation was immediate. The result was chaos — and a lot of journalists losing freelance jobs.

To sum up a very, very long story, here in bullets is the California legal arc:

  • Sept. 2019: AB5 implements the ABC Test. Freelancers lose work, as confusion erupts over who can hire what sort of writer when. Particularly onerous for reporters: A specific, 35-piece limit provision that makes it impossible to be a freelance weekly columnist.
  • Sept. 2020: AB2257 amends AB5. Scores of carve-outs and exceptions for dozens of industries soften the damage from AB5, including removal of the 35-article cap for writers. But problems remain, including a rule that freelancers must have a contract before working. That’s difficult to pull off if you’re a journalist, photojournalist, or videographer rushing to the scene of a protest or fire. Activists note this rule amounts to an assault on independent journalism and results in the suppression of news, as all news organizations have long relied on stringers or freelancers to get news their staffers can’t access.
  • Nov. 2020: Prop 22 exempts Uber and Lyft. The ride-share companies take their case to the voters, spend big, and win. People want cheap cabs! The original reason for AB5 is defeated by this voter initiative.

Freelancers continue to press for full repeal of AB5, to resolve the confusion these three separate, and in some ways conflicting, pieces of legislation have wrought. The American Society of Journalists and Authors (ASJA) is among the organizations suing over what the group points out are First and 14th Amendment violations in the AB5 provisions that impact journalists.

“AB2257 made some things worse, with provisions that only apply to freelance writers, no other type of freelancer,” notes JoBeth McDaniel, a freelance writer who chairs the First Amendment committee for ASJA.

California’s AB5 dropped on freelancers as an unexpected A-bomb (partly because it had no public comment period). When New Jersey and New York floated similar bills after AB5 passed, Kavin says, freelance journalists were ready for them.

How activists won 2 ABC Test battles

When New Jersey and New York both tried to follow suit with similar laws to California’s AB5, freelancers swung into action. Op-eds and letters to the editor were sent by freelance writers to the Philadelphia Inquirer and other area papers.

Activists followed up with organized letter-writing campaigns to New Jersey lawmakers and in-person visits, to explain face-to-face how freelancers work and that they prefer their independent lifestyle. This was eye-opening news for many lawmakers, Kavin says. Few had ever freelanced.

“When we explained how we earn a living, and how well many of us earn,” Kavin says, “they were flabbergasted. And once they learn it, they don’t want to cause us harm. When we don’t speak up, then they just hear from those who say we’re being exploited by the gig economy.”

The New Jersey bill went down to defeat in January.

In New York, Governor Andrew Cuomo compared gig workers to 1930s sweatshop workers and vowed legal action in his ‘state of the state’ address last January. A full-court press by freelancers followed, and no bill was ever floated. After input from freelancers, Cuomo vowed to set up a commission to study the issues. But then along came Covid, and it was never formed, Kavin says.

Yes, Virginia has a way

Meanwhile, one Blue State quietly passed a new labor bill in 2020. It creates strict new definitions to avoid worker misclassification and encourage corporations to classify workers as employees.

The good news? The bill used the IRS test to define freelancers, preserving freelancer rights. Activists plan to hold up the Virginia law as a model for how the PRO Act should be revised.

Pro Union, Pro Freelancer

As a former union member myself (OPEIU, yo!), I’m glad to see the focus on strengthening unions. It’s no secret that the decline of unions means a shrinking American middle class.

But union strength and the freedom to freelance both need to be upheld. The Virginia law shows we can do both.

What you can do to save American freelancing

There are a couple of avenues to opposing The PRO Act’s freelancer language.

One lies in supporting a new labor rule passed in the final days of the Trump administration, which uses the IRS test for defining freelancers.

Watchers expect this last-minute law to be quickly nullified by the incoming administration. But if it stood in place, freelancers would be fine.

The other, more likely route is lobbying to change the PRO Act language to use the IRS test instead of the ABC Test. Virginia’s law has shown that there is a middle path that strengthens unions yet preserves freelancers’ rights to work as they choose.

Activists need to hold up the Virtginia example, write letters to the press and federal lawmakers, and if possible call on lawmakers in person to educate them about freelancing and the many workers who prefer to be their own boss, Kavin says.

The Fight for Freelancers USA site has good resources to get you started, as does their Facebook page. ASJA does as well, on both the AB5 lawsuit and lobbying for changes to The PRO Act.

Note: This post has been updated to include several clarifications, including on the focus of the PRO Act and of the ASJA lawsuit, as well as the nature of the labor ruling.

Concerned about The Pro Act? Let’s talk strategy in the comments.

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34 comments on “Freelance Fight Goes National: Must-Know Info on The ABC Test

  1. Matt on

    I’m a little confused over the IRS provision about the “permanency of the relationship,” since some freelancers can work for quite a while providing content for the same company. As someone looking into freelancing, how is that best judged or approached?

    Reply
    • Angie Mansfield on

      Hi, Matt –

      Caveat: I am not a lawyer. Don’t take legal advice from a blog. 😉

      That said, I think the IRS rule is more about who controls your workday and how you do your job. If you have an employer/supervisor controlling when and where you work, what tools you’re allowed to use, etc., then you’re an employee, even if you work from home 100% of the time. If you work wherever and whenever you want, using your own equipment and tools, and are allowed to work for however many clients you want, you’re a freelancer. That’s an oversimplified explanation (and definitely check with a business attorney in your state if you have any questions/grey areas), but hopefully it clarifies for you.

      Reply
    • Angie Mansfield on

      An interesting take, and a good lawyer could argue that case, but I’m not sure I’d stake my career on it succeeding. I’d still like to see some protection for gig workers that actually takes freelancers into account so we don’t have these grey areas to get lost in.

      Reply
    • Carol Tice on

      If only that were true, Rich — but if you read through the story, you know that no freelance journalist can pass the ABC test, so it’s a serious threat to writers who write for publications.

      Reply
    • Tara on

      I wish I felt as optimistic, but the experience of freelance writers and photographers in California tells a different story, as the law there is very similar to H.R. 2474. Many of them are being shunned by clients now, because of fear of being fined for using freelance services “illegally”. Plus, I know several people in other industries who will most definitely be affected, so either way, this is not okay. We all need to stand together and do something about now. Once it’s implemented, it will be extremely difficult to undo it.

      Reply
      • Evan Jensen on

        TRUTH! “We all need to stand together and do something about now. Once it’s implemented, it will be extremely difficult to undo it.” 👊

        Reply
  2. Sharla Taylor on

    If you go to Congress.gov and type “ABC Test” in the search bar, you’ll find see
    1. H.Amdt.767 — 116th Congress (2019-2020)
    Description: “An amendment numbered 1 printed in Part B of House Report 116-392 to clarify that the ABC test included in the PRO Act does not preempt any State laws governing the wages, work hours, workers compensation, or unemployment insurance of employees.”
    Amends Bill: H.R.2474
    Sponsor: Rep. Stevens, Haley M. [D-MI-11] (Offered 02/06/2020)
    Latest Action: 02/06/20 On agreeing to the Stevens amendment (A001) Agreed to by recorded vote: 241 – 178 (Roll no. 41). (All Actions)

    CONGRESSIONAL RECORD – DAILY EDITION
    https://www.congress.gov/congressional-record/2020/2/6/daily-digest/article/d130-3?q=%7B%22search%22%3A%5B%22ABC+Test%22%5D%7D&s=2&r=1

    https://www.congress.gov/congressional-record/2020/2/6/house-section/article/h879-1?q=%7B%22search%22%3A%5B%22ABC+Test%22%5D%7D&s=7&r=2

    Reply
  3. Sharla Taylor on

    Thanks for sharing your knowledge of the potential impact of legislation in Congress. I wonder if having an employee identification number would solve the issue? Then the transaction would be B2B rather than from a company to freelancer/subcontractor. It will be interesting to see how this plays out. I suggest contacting your U.S. Representative for your district and both Senators to express your concerns. I’ve included links to find your elected officials in Washington, DC.
    https://www.house.gov/representatives/find-your-representative
    https://www.senate.gov/senators/index.htm

    Reply
    • Debbie Kaplan on

      Shara – thank you for providing information on contacting US representatives – it is important to contact them and share how the ABC test and this type of legislation affects constituents with personal stories. Unfortunately having an EIN is not sufficient to show the transaction is B2B. Just as legislation hasn’t mandated that a specific corporate form (S Corp, C corp, LLC) means a business is exempt, having an EIN doesn’t either. It’s a good idea to have an EIN regardless! It protects a person’s social security number from potentially getting leaked, and does track business payments under a business tax number.

      Reply
  4. Linda on

    Thanks for posting this Carol. I live in Sacramento, California where most of this rolled out and I’ve heard a LOT about it locally. I’m all for writing our Assemblymen, Congressmen, and even calling them to educate them on how freelancers work and survive. Meeting them in person may be difficult due to our ongoing lockdowns preventing us to gather together and many won’t allow one-on-one meetings.

    I’ve been looking for work for the past year and haven’t found anything yet. Because I’m in California I’m aware that many companies won’t touch me. Plus, it’s hard to pitch a content strategy to a company that may require more than 35 posts, when AB5 limits my freelance work.

    Partnering with ASJ, the Freelancers Union, and other groups to brainstorm and move forward is a great strategy to work together to sway the PRO Act and educate politicians on how we make a living writing.

    Reply
    • PATRICIA NICHOLS on

      So, am I understanding correctly that the law applies to where the freelancer lives – regardless of where the client is located?

      Reply
      • Carol Tice on

        I’d love to get Kim to weigh in on that question — my understanding is it actually applies to BUSINESSES based in a state, but there’s a lot of confusion around it that has led some companies across the country to be leery of using CA writers. That’s my understanding. And a lot of writers tend to write for local companies, so if they’re based in California, many of their clients are, too.

        Reply
        • Kim Kavin on

          The businesses are the ones that get fined by the state, correct. Not the freelancers.

          However, the freelancer also takes a financial hit because the business response to this threat of fines is to drop freelancers altogether. To eliminate the risk.

          That’s what we saw happen after AB5 went into effect in California.

          Reply
      • Debbie Kaplan on

        Patricia – AB5 applies to freelancers in California, however the hiring/contracting company can be located anywhere. However some other states use the ABC test for classifying employee v. independent contractor, and as a result of AB5 and the attention it’s brought to the issue, some companies are wary of using freelancers from states with ABC on the books, where they weren’t concerned before. As someone fighting this in NJ, I’ve heard stories of publishers not using writers in other states with the ABC test on the books, out of an abundance of caution. Lawyers may advise their clients to take a conservative approach, to avoid a state Dept of Labor investigation and the money that costs.

        Reply
        • Carol Tice on

          All true — but meanwhile, I hear from OTHER freelancers whose clients are based in CA, are news websites or portals that are clearly violating AB5… and the companies don’t care, haven’t changed anything they’re doing.

          It’s seen a real patchwork of responses, from ‘come and get me, I don’t care’ to companies with other-than-content-based business models, selling other products or services getting rid of freelance copywriters, when they don’t have to! The bottom line is it created confusion in the marketplace and a lot of job loss for freelancers who do this full-time and love their lifestyle. The fight continues…

          Reply
          • JoBeth McDaniel on

            Carol, all good points. Yes, we see overly cautious businesses and some that simply ignore the law, at their peril.
            AB5 and AB2257 are both so poorly written that most businesses truly don’t know what to do. Audio journalists have to look at three sometimes muddled and conflicting sections of AB2257 to figure out if they are now exempt. Also, we are seeing an uptick in misinformation posted online, sometimes pushed by people with only a shallow understanding, and others who seem intent on pushing misinfo. One self-described expert keeps claiming that any sole proprietor is exempt from AB5 and the ABC test. That’s ludicrous, harmful to businesses that hire ICs, and disturbing to those of us deep in this fight. ASJA and NPPA both have great website info pages, but the state has done a terrible job of providing simple, clear information.

    • Carol Tice on

      Linda, the 35 cap has been lifted by the amendment bill, as the post notes, and none of this was ever an issue doing copywriting or content strategy for any business where their core product isn’t articles but something else. The only ‘companies that won’t touch you’ should be magazines and newspapers, or big content sites like Vox, which I know did hire some full-timers and stop doing freelance.

      Reply
      • W Morris on

        But this screws freelancers of ALL types not just writers who want to freelance for media companies. This language needs to be changed.

        Reply
        • Carol Tice on

          Absolutely right, Willi — anyone who writes for publications anywhere should certainly be concerned, as well as anyone who wants independent news. It’s been a reality for the entire history of newspapers that staffers don’t get all the stories! We’ve always needed freelancers to bring us more.

          Reply
      • JoBeth McDaniel on

        Yes, the location of the freelancer is key, but so is the location of the business. CA freelancers were blackballed by non-CA businesses early on, with publications sometimes advertising for non-CA resident reporters to report on California. The law is not as clear about CA businesses that hire non-CA freelancers, but in recent years, the state has aggressively taxed non-CA freelancers who have worked for CA businesses. Hope that helps. AB5 and AB2257 are both poorly written laws with much legal ambiguity. There are four or five federal lawsuits against these laws currently in court, so stay tuned!

        Reply
        • JoBeth McDaniel on

          One correction; the federal labor guidelines released by the Dept of Labor (the ones that may be overturned in the Biden administration) don’t overturn any state laws. States are free to write their own labor laws, as Virginia did with the new independent contractor law
          based on the IRS test. It’s good to have the federal govt on the side of freelancers, but for most freelancers, it won’t change anything.

          Reply

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