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The Unintended Consequences of AB5

Shaun Spalding

Introduced by California Assemblywoman Lorena Gonzalez, California Assembly Bill 5 (AB5) has sent shockwaves through the state’s workforce.

Effective January 1, 2020, the bill was ostensibly to help gig workers like Uber and Lyft drivers. However, it has had the unintended consequence of penalizing people who want to be independent contractors, especially creative freelancers like writers, journalists, graphic designers, photographers, and other IP-related content creators.

AB5 completely changes the way that every single employer in California treats independent contractors. The intended target being those large employers that once “got away with” misclassifying employees in order to save money—to the detriment of those employees. Those employers will now have a much more difficult time doing so.

The bill makes a presumption that every freelance and independent contractor should be classified as an employee, whether they wish to be or not. As a result, confusion and fear over the bill are causing companies to avoid working with anyone in California.

“Many employers who used to hire freelancers as contractors are now less likely to hire from California if they have a choice of hiring from one state or another,” says Shaun Spalding, California Western’s New Media Rights Assistant Director, in a recent Labor Pains podcast with interviewer Larry Buhl. “This has already started happening with the layoffs at SB Nation, probably the most famous, where they laid off hundreds of their California contracted writers in anticipation of the law.”

Also, unforeseen, states Spalding, is that although Uber and Lyft are the types of companies that the law was targeted at most, they actually have the money to fight it, and they have already claimed that they are not subject to it.

“Contrast that with the clients that we work with who don't have the money or organization to fight it, but must comply with it anyway,” he says.

“People like freelance developers are not only ‘losing jobs’ because employers are less likely to work with them, they are also dealing with an increased level of difficulty hiring the subcontractors who assist them because now they have to comply with new, expensive administrative rules,” Spalding continues.

“They are trapped in the middle of this: simultaneously losing paid work but also being forced to spend extra money to maintain their existing business. And these are exactly the type of people we have to figure out realistic solutions for with help from our students,” adds Spalding.

In the podcast, Spalding talks about suggestions which he and New Media Rights are putting forward to try to fix this problem, including creating exceptions to the law based not necessarily on specific industries, but instead on characteristics of those industries.

“For example,” says Spalding. “Those who use creativity in their work, such as writers, photographers, independent journalists, and graphic designers have the ability to be employed by employers outside of California. However, those living in California now have to compete with other states’ workers where the provisions of AB5 do not apply. Therefore, California creatives should have a blanket exception.”

“These types of podcasts are a great way of getting information out about the unintended consequences of AB5,” says Spalding.

“It needs to be fixed to help everyone because right now there is a subset of everyday workers who gain nothing, who lose a lot, and who don’t have any coordinated voice in politics for legislators to take their concerns seriously.”

Listen to Shaun Spalding’s complete podcast interview with Larry Buhl here.

About New Media Rights: New Media Rights is an independently funded program of California Western School of Law, a 501(c)(3) non-profit. It is a program that provides preventative, one-to-one legal services to creators, entrepreneurs, and internet users whose projects require specialized internet, intellectual property, privacy, media, and communications law expertise.