December 19, 2019

How the new gig economy law impacts other freelancers

The future of work is in the process of being defined with a new series of developments in California. The flexibility of freelancing (naturally with all of its downsides) is now being rewritten and redefined, which may limit those who are somewhere between being free enough to contribute a substantial amount but aren’t considered valuable enough to some companies to go full time.

What happened?

Vox Media recently let go hundreds of California-based freelance writers and editors that used to cover sports for its SB Nation blog network. The reason? Compliance with California Assembly Bill 5 ( commonly known as AB 5). The law, which goes into effect on January 1, 2020 was originally meant to target ride-share giants such as Uber and Lyft, forcing them to treat their contracted drivers as employees with the appropriate benefits.

The bill does have larger ramifications beyond drivers, however: It would also apply to writers and potentially affects other knowledge and culture workers, according to Jori Finkel. “The law already carves out many exceptions for particular professions, including accountants, real estate agents, insurance brokers, doctors, dentists, lawyers, engineers, private investigators, salespeople and commercial fishermen,” she explains. “In the cultural sphere, architects, graphic designers, grant writers, and fine artists are identified as exempt, as are photojournalists and journalists who contribute fewer than 35 times a year to a particular company or publication.”

The gist of AB 5

AB5 is meant to give protections to contracted workers who don’t receive the same benefits for the amount of work they do relative to regular employees, such as minimum wage, worker compensation, insurance, paid vacation and sick leave.

In 2018, the Supreme Court of California ruled to impose stricter requirements for the classification employees, which gig workers were previously excluded from. The court made a 3-part test (known as the ABC test) where employers had to prove that their workers were properly classified as independent contractors under these conditions:

  • The worker is free from the control and direction of the hirer in connection with the performance of the work, both under the contract for the performance of such work and in fact
  • The worker performs work that is outside the usual course of the hiring entity’s business
  • The worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed for the hiring entity

This newer test doesn’t apply to jobs falling within a select number of categories. That said, even after passing ABC, the hiring party might have to demonstrate they’re classified properly under the Borello test, an older standard.

Flexible Freedom vs. Structured Protection

Some supporters say that aside from the protections offered above, the bill would prevent the state from losing billions from payroll taxes the contractors and companies hiring them do not pay. Comparatively, opponents say it would increase labor costs by 30%, which would be passed on to customers while reducing service and flexibility for workers.

Some believe that the bill signals “the death of the gig economy.” Brittany Hunter, for one, emphasizes the difference between employment and contracting, the backbone of the highly developed gig economy, which was never meant to be a traditionally structured sector.

Ultimately, it’s challenging to assess whether the bill is good or bad because it depends on how we think the parameters should lie with respects to work:

Protection versus Exploitation: Similar to how tax avoidance is legal and tax evasion is illegal, many companies will likewise try to legally limit how much they have to pay to benefit from the services of a worker. But of course, the sometimes ambiguous nature of contract work, especially how it unfolds in the relatively recent gig economy, means there’s room for exploitation, which is what drove some of the need for the legal protections offered by AB 5.

Structure versus Flexibility: Arguably one of the big draws to remaining a contractor is the flexibility that the over one-third of Americans have used to build or supplement their incomes. For some, the lack of commitment of a formal employment contract means a lack of the same benefits and protections, but also the lack of obligations like minimum working hours or for some, the need to even work at all.

Quality versus Quantity: By making it more expensive to employ people, in theory, fewer people will create output for the media industry, this means less content, and perhaps worse content if freelancers played a crucial role in driving certain facets of a business. Alternatively, this could increase a reliance on passionate but unpaid workers, which of course, isn’t a good look for any industry.

The Takeaway

Vox’s move to cut writers showcases how compliance with new laws largely meant for one segment of an industry (the ride-sharing and maybe food delivery aspect of the gig economy) spills over into creative work.

The law offers protections in the form of structures that both employer and contractor (or employee) have to abide by. But when companies that benefit from the gig economy “take it out” on contracted workers to adhere to laws, it can mean less freedom (and work) for those who don’t want or need the protections of those regulations. But more crucially, it puts yet another stressor on workers who can’t secure more permanent jobs and are in the gig economy out of necessity.

This is bound to raise questions as to how much or little intervention is needed in the free market that produced the colossal gig economy we see today, especially depending on whether we view gigs as a symptom of today’s widespread job insecurity and the need to work for life at all costs or the key to being our own bosses and shaping our own careers free from bureaucratic corporate jobs.

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