This year, California passed something knowns as Assembly Bill 5, or AB5 for short, and it has everyone from Uber and Lyft drivers to other contractors as nervous as a long-tailed cat in a room full of rocking chairs.
The reason is simple. The bill, while it has good intentions, is designed to restrict companies who abuse the independent contractor title to skip out on paying for benefits and employment taxes they would have to with regular employees. The other impact includes workman’s compensation insurance, mandatory equipment, and other expenses carried by the contractor when they are not hired as employees.
The problem is the impact this has on those who want to work in the gig economy and would rather not have a “job” where they have to go and follow the instructions of a “boss” during certain office hours. It also affects the already stressed publication industry, because it almost forces them to hire staff writers, which for many of these publications could spell “the end.”
If you are a freelance writer, no matter where you’re located, this bill affects you, and if other states jump on the California bandwagon, it could get worse before it gets better. There are things you can do to still thrive, but if you have been working a more traditional freelance model working for publications, there are some things you need to pay attention to.
Where This All Started
Before we go too far, we should probably look at AB5 in greater detail, who it affects most, and where it came from. Basically AB5 put into law a 2018 California Supreme Court ruling that worked to clarify who could be classified as an independent contractor. Aimed at companies like Lyft and Uber, who save as much as 30% on labor cost by classifying their workers as contractors rather than employees, the law will have far-reaching impact, and challenges are already being raised by a number of industries.
To break it down, the law says you can be classified as an independent contractor only if the following conditions are met:
- First, you must be free to perform services without the control or direction of the company.
- You must be performing work tasks that are outside the scope of the company’s normal operations. (more on this in a moment)
- The worker is customarily engaged in an independently established trade, occupation, or business that is of the same nature as the work they are performing. In other words, if you are a freelance writer, you can write for a company.
This creates some problems and gray areas for things like magazines who hire freelancers to write content for them or to take photographs for their stories. Those publications essentially publish stories and photographs, so this fails the second qualifier.
The immediate impact is that this bill makes independent contractors in many of these industries employees, meaning they are entitled to minimum wage, expense reimbursements, and other benefits that are required by the strict California labor law.
There are loopholes and ways around this, and here are some tips for freelancers in and out of the state.
Setting up an LLC
I’ll simply say this: if you are a freelancer and you don’t already have an LLC, now is your real reason to get one. Companies can do business with other companies in the same industry, and this is a quick loophole that will work in some, but not in all cases.
The truth is, you should have an LLC in place for a number of other reasons, too. Your writing is a business, and for tax purposes if nothing else, you should be keeping your expenses and income from it separate.
This is step one, but it won’t solve this issue entirely.
Writing for Publications in California and Beyond
Here is one of the places things get tricky. If the publication you write for is based in California, they are subject to this law, and so are you. But even more concerning is that if you are a freelancer located in California, YOU are governed by this law, and even if the publication you work for is not in your state, the company still must make you an employee.
This law comes at a time when countless cities across the country are trying to entice remote workers and freelancers to come live in their cities with crazy incentives like offering houses for $15,000. For a freelancer writing for publications, this is an immediate incentive to move.
The law does allow some latitude, but if a writer creates more than 35 pieces for a publication in a year, they must be made an employee. This means if you write a weekly column, you are in trouble. You could, as some have suggested, split the articles with another writer and each write 25 of them, which is much better than zero.
Even with these loopholes, many publications are letting their California freelancers go for fear of violating this law. It’s a tough spot to be in.
Online Publications and AB5
Just because a publication is online does not mean it does not have physical headquarters somewhere, and if you live in California, they are still subject to these rules. That means that daily sports writers and others must now be hired as employees in California and beyond.
For many publications, they have gone to a freelance model because it is the only thing that let them stay in business. The reduction in advertising revenue and the drop in subscriptions means quite simply that any publication based in California will have to seriously rethink their business model whether they publish digital or physical editions or both.
Business Writing and Other Contracts
Here’s where the good news lies. If you are a freelance writer, and you do business and technical writing for companies who are not in the publication industry, you can still work for them. So if you are writing tech manuals for a startup in Silicon Valley or monthly newsletter content for a law firm in California, you are fine. The same goes for ad copy, web page content, and more.
The only way that changes is if you’re actually a lawyer and writing for that same law firm. Since you’re technically engaged in the same industry, rule #2 applies, and you have to be made an employee. Of course, if you are practicing law in another state, you might be able to wiggle out of that situation, but it would be questionable.
Still, if you are writing for businesses as a freelance writer, you can probably keep doing so with no issues at all. I would still form an LLC and do business with them as your company, not yourself to protect yourself from potential issues from AB5 and similar bills.
Blog Writing for Industries
Fortunately, this falls in the same category as business writing and other web writing. As long as you are not writing in the same industry you are a part of, you can keep writing blogs for all kinds of industries, from clothing manufacturers to business brokers, real estate agents to law firms.
The only area where it gets gray is SEO companies, who also offer web content development as part of their menu of services. Since they actually do what you are doing for them, you are probably wise to limit yourself to the 35 articles per publication rule, and count them as a publication.
For some freelancers who rely on this for their bread and butter, this could be a problem. However, as long as you are not in California and neither is the company you work for, you should be fine, at least for now.
The problem comes if other states decide to follow California’s lead. Whether they do or not will probably relate to all of the upcoming legal challenges that AB5 will face. We have some time, but it is also best to be prepared.
Freelancing for Government Contractors and AB5
This is another gray area. The State of California does not use a lot of freelance writing talent, but the Federal government does. The most common scenario for freelance writers is that you work for another company that already has a contract with the government, and you subcontract for them.
Again, this all depends on what the company you subcontract for does. If they provide social media content and blog posts to the government agency you are writing for and they are located in California, this might become an issue. However, if both you and that company are outside of California, your job is safe, at least for now.
The Employee and Staff Writer Advantage
I’d be wrong if at some point here I didn’t talk about the advantages of being an employee or a staff writer. A salary and benefits sound good to many freelancers, and there is even a large group of journalists who are in favor of the bill and its provisions. There are plusses, like a regular paycheck, health insurance, paid time off, and others.
However, it also means being tied to a place and particular organization, and more restrictions than a freelancer faces. And there are a lot of us out here who would rather do almost anything but go to work for another person or company, having our hours and actions dictated by the man. No matter what kind of freelancer you are, AB5 will have an impact on you and your income, and even your ability to keep doing some of the things you have been doing. But take heart. We still have things we can do, and we’ll be doing them for a long time to come.