AB 5: Law of the land, but hurdles remain

California’s landmark labor law, AB 5, which limits the ability of employers to classify workers as independent contractors rather than employees, is under fire. AB 5 faces lawsuits from organizations representing freelance journalists, ride-share companies and truck owner-operators. 

The new law, which went into effect last week and stems from a 2018 California Supreme Court ruling in the Dynamex case, rewrites key elements of California labor code. 

It was approved by the Democrat-controlled Legislature and signed by Gov. Gavin Newsom in September following intense negotiations. It is viewed by advocates and critics alike as a much-needed worker protection statute that may resonate across the country. Broadly, it is favored by organized labor and others, but opposed by many employer and business groups, who say it could boost their costs by 30%. Click here to view a fact sheet describing the workers’ classifications under AB 5, provided by the author’s office.

Aside from the lawsuits, however, there is confusion about who’s covered and who’s exempt.

It also is the target of a $110 million ballot campaign, with companies including Uber, Lyft, Postmates and DoorDash hoping to get voter approval to carve out exemptions for themselves. Just before the end of 2019, Uber and Postmates filed a federal suit challenging AB 5 as unconstitutional.

The truckers also have mounted a court challenge.

“We expect they will continue to invest resources in protecting their profits earned on the backs of workers, but we will continue to fight them at all levels to return jobs in the trucking industry to good, middle class careers,” AB 5’s author, Assemblywoman Lorena Gonzalez, D-San Diego, said in an email.

Aside from the lawsuits, however, there is confusion about who’s in and who’s exempt.

The business community “will be aggressively pursuing further exemptions next year (2020). The test set forth in the Dynamex ruling does not correctly contemplate the realities of the modern economy nor fairly consider the sweeping impracticalities it would bring to the California economy,” wrote Denise Davis of the California Chamber of Commerce.

The Dynamex case involved a worker’s suit against a courier company named Dynamex that challenged the firm’s decision to change the status of its workers from employees to independent contractors. It affects an array of job categories, from manicurists and delivery drivers to sex workers and builders. Click here for the official text and analayses of the bill.

The new law codifies and expands on the three-point “ABC test” that was described in an earlier court case to determine whether or not a worker can be classified as an independent contractor. Proponents of the law say it makes it more difficult for companies in the gig economy to classify workers as independent contractors and thus deny those independent contractors the benefits they would be entitled to as employees. 

The bill’s biggest targets include ride-hailing companies like Uber and Lyft, in part because Uber and Lyft have been criticized about how they treat their drivers.

Under that test, the worker is an independent contractor if the company does not direct  how the work is performed, if the work is different from the company’s business and if the worker operates a business doing the same kind of work that he or she does for the company.

There are a number of categories that can be exempted under AB 5 and there is uncertainty about how much of an impact AB 5 will really have on the work place.

“Much of the recent media coverage of California’s AB 5 suggests that the bill represents a sea change in California law with respect to the classification of independent contractors. Not quite,” noted the National Law Review in a September 2019 analysis.

That’s due in part to AB 5’s exemptions, which can include doctors, lawyers, insurance agents, engineers and many others. Click here for the official analyses and text of the bill.

The bill’s biggest targets include ride-hailing companies like Uber and Lyft, in part because Uber and Lyft have been criticized about how they treat their drivers. If Uber and Lyft drivers were to become employees under AB 5, they would be eligible for basic rights like minimum wage and paid time off, Gonzalez noted.

Some drivers have hailed the new law as a win, while others say that working conditions haven’t improved. Uber and Lyft have both announced that they will fund and support the 2020 ballot initiative to alter the law.

Some journalists contend AB 5 will make it difficult for smaller news organizations, who rely on freelancers, to continue their coverage of certain topics. 

Uber, Postmates (a food delivery service) and two drivers who work for the companies filed the lawsuit against the state, challenging the constitutionality of AB 5. They say the new law unfairly targets certain independent contractors and creates “nonsensical” exemptions for others. 

Freelance journalists have challenged the law, too.

On Dec. 27, the American Society of Journalists and Authors and the National Press Photographers Association filed a joint suit. The two organizations are being represented by the non-profit Pacific Legal Foundation, a libertarian public interest law firm. 

Under the law, freelance writers, editors and photographers cannot submit more than 35 content submissions to one media organization per year. Freelance journalists who shoot video are given no exemption at all. Journalists say the submission limit will put many freelancers out of work because they often submit more than 35 pieces of content per year. Click here and here for fact sheets related to journalists.

They also contend AB 5 will make it difficult for smaller news organizations, who rely on freelancers, to continue their coverage of certain topics. 

“This is a classic case of unintended consequences,” Linda Marsa, a member of the Association of Health Care Journalists, said earlier. “The thrust of the bill is wonderfully progressive California, but what’s really scary is that people don’t know the implications,” added Marsa, a free-lance writer and a contributing editor to Discover. Her comments appeared in the AHCJ blog, Covering Health.

The lawsuit filed by the ASJA and NPPA argues that AB 5 unconstitutionally restricts free speech and violates the Equal Protection Clause of the 14th Amendment. Under AB 5, the Pacific Legal Foundation argues, journalists are not treated the same as those working in similar professions. 

Two trucking organizations have also filed lawsuits that challenge AB 5.

Caleb Trotter, an attorney for the Pacific Legal Foundation representing the ASJA and NPPA, says the law “singles out journalists for particularly restrictive treatment.” Freelancers in similar “speaking professions” like marketers, grant writers and graphic designers are given full exemptions.

Trotter says that the distinctions between freelance journalists and the speaking professions receiving full exemptions are arbitrary. Assemblywoman Lorena Gonzalez, who sponsored the bill, said in an interview with The Hollywood Reporter that the number was “a little bit arbitrary.” 

Trotter said the goal of the lawsuit is to get courts to treat freelance journalists the same as other speaking professions. 

“This group isn’t asking for any special treatment,” Trotter said. “They just want to be treated the same as other speaking professions are treated under this law, which is to be exempt from the three-part test and only be subject to the traditional California test to distinguish between an employee and an independent contractor.”

A hearing for the case’s preliminary injunction is scheduled for March 9.

Two trucking organizations have also filed lawsuits that challenge AB 5.

In November, the California Trucking Association filed a suit challenging, AB5’s ABC test as it applies to all motor carriers. They say that many truck owner-operators want to remain independent. AB 5 could hurt their business. 

Vox Media announced that it had ended contracts with hundreds of freelance writers and editors in California who covered sports for a blog network called SB Nation

The Western States Trucking Association filed a suit in December that specifically challenges AB 5’s construction trucking provisions. It says that there is no test for motor carriers providing construction services, making workers employees rather than independent contractors. 

Both CTA and WTSA argue that AB 5 conflicts with federal law which prohibits states from regulating the “rates, routes and services” of the trucking industry. 

The CTA hopes to find a compromise between protecting misclassified workers and protecting independent truckers. 

“The ultimate goal is to strike a balance between protecting misclassified workers without infringing upon independent truckers’ right to make a living in California,” Chris Shimoda, Vice President of Government Affairs at CTA said in an email. 

The effects of AB 5 are already being felt across the state. 

“The impacts are happening now,” Shimoda said. “Our office is fielding calls daily from owner-operators losing business because of AB 5.”

On Dec. 16, Vox Media announced that it had ended contracts with hundreds of freelance writers and editors in California who covered sports for a blog network called SB Nation. The blog network will add 20 new part-time and full-time positions to replace the freelancers it cut. 

“I understand a contractor who does not want a job being upset, but that’s certainly not all bad,” Assemblywoman Gonzalez said of Vox’s decision in a tweet. 

Gonzalez has also pointed out that Vox Media is facing a class action lawsuit from SB Nation writers who say they were misclassified as contractors and thus underpaid. 

Still, many freelance journalists and independent truck owner-operators continue to be vocal about why the freelance model works for them. The outcome of these lawsuits will help determine whether or not they will be able to continue using that model.