With the gig economy experiencing a full boom, more attention than ever is turning to the backbone of companies, like Uber, operating in that space — independent contractors. Last year, the California Supreme Court decision known as Dynamex set in motion new standards for how workers should be classified as either employees or independent contractors in the state.
The AB5 bill, recently passed by the California Assembly, seeks to codify the decision and introduces the “ABC test” as the standard for determining whether a worker is appropriately classified as an independent contractor. California is the largest state economy in the country, and because of that, the decisions made there have significant influence. If AB5 is passed, other states may follow in California’s footsteps. It stands to not only offer key legal protections to workers misclassified as independent contractors but to reshape how we all think about and work with them.
Many working in the creative industry, especially video production, do so as freelancers. For most, it’s a great, flexible option. However, there are numerous ways freelancers can be burned without the legal protection afforded to full-time employees. So some may want to seek those protections. If the California State Senate passes the AB5 bill, a measurement called the ABC test would be used to verify the worker status of a contractor. The requirements outlined are: the person (a) is free from the company’s control, (b) is doing work that isn’t central to the company’s business, and (c) has an independent business in that industry. If a worker doesn’t meet all of these requirements, they could be classified as an employee.
It may not seem like those in the production industry are vulnerable to exploitation, but here’s an example of how a worker could be misclassified — Let’s say you’re a videographer. You work exclusively for one creative agency and do not have a business established where you take on jobs from other clients. The agency produces videos for paying clients as their core business. The agency assigns your deliverables and sets your deadlines, in which you have no say. In this case, under AB5, you could be classified as an employee.
There are valid reasons you might want to reconsider your contractor status. Full-time employees at organizations are entitled to benefits such as health insurance, parental leave, workers comp, and unemployment benefits. Those benefits may not matter to you today but could be a lifesaver in unforeseen situations.
If you enjoy and want to keep your contractor status, these are four steps that you should take, no matter what, to protect yourself from exploitation.
- Never skip written project proposals, contracts, and invoices with your clients. Even if you have great long-standing relationships with them, these agreements can prevent misunderstandings and ensure you are paid for your work.
- You should appropriately increase your rates year-over-year or as you add new skills and abilities to your scope. The standard cost of living increase for full-time employees in recent years has been 2-3%. So why should you charge the same rate forever?
- Set boundaries with your clients around your hours and availability. Don’t fall into the habit of answering calls from clients during your family time or working more hours than you agreed to in your contract without being compensated.
- Your safety is a hard line. You have the right to say no to clients who want you to work under risky conditions. You probably hold an insurance policy but do you want to lose out on other business if you are injured on the job? A setback like that could be worse than you think.
Does this mean that any contractor who doesn’t pass the ABC test can now qualify as an employee? No — for a few reasons. The bill was introduced in the state of California. The bill still needs to pass the State Senate. Complexity will likely be added to the bill regarding which professions are covered or not. What’s important here is that this puts a spotlight on the conversation we should be having about independent contractors and how companies treat them. Moreover, it’s a good reminder that even if you are a freelancer who wants to remain a freelancer, you should always advocate for basic protections for yourself and your business.