California’s new Assembly Bill 5 law takes effect on the first of January. However, instead of setting a good tone for the new year, for many, AB5 appears to be a tone-deaf effort.
Launched by California Assemblywoman Lorena Gonzalez to address gig economy issues that have resulted in unfair treatment of Lyft and Uber drivers, AB5 was designed to protect these workers.
“AB5 forbids businesses to use contractors unless the companies can pass a stringent requirement known as the ‘ABC test.’ It’s designed to ensure that all workers are classified as employees unless they perform their work independent of supervision, have an established business doing the same sort of work for multiple customers and are doing work that isn’t part of the company’s core business,” Megan McArdle said via The Washington Post.
Companies classifying these workers as “employees” must then set aside taxes, Social Security benefits and other benefits.
The new law — designed to protect rideshare drivers — hurts freelance writers and other workers across the state. Unlike other workers, for whom becoming an employee may be a welcomed status change, freelance writers may enjoy the benefits — and the freedom — of writing for different companies and working flexible, remote schedules.
For freelancers — assuming employee status could negatively impact that flexibility — they fear that AB5 will not just precipitate a change in hiring status. It could also threaten the prospect of any future freelance earnings.
Research shows that those fears are well-founded. Companies considering the financial implications of offering its freelance writers salaried positions are faced with the difficult decision of severing professional ties altogether.
As James Ewert, general counsel to the California News Publishers Association, revealed to Michael Hiltzik in a rent LA Times article, the cost increase of changing a worker’s status from freelancer to employee can be up to 30 percent.
As Hiltzik argues, while AB5 forces Uber and Lyft to add drivers to their employee roster, there is no such mandate for California freelance writers, especially since writers can be sourced from any other state. It is this financial implication that likely led Vox Media to dismiss a large number of its freelancers; other media companies are soon to follow.
To seek protection against mass layoffs, freelance associations have met with Assemblywoman Gonzalez in hopes of obtaining exemptions. Those discussions are still underway. However, any negotiations would not be put in place before AB5 takes effect on Jan. 1.