What Creative Organizations and Independent Contractors Should Know About California AB5
Does your organization or company hire independent contractors or do you work as an independent contractor? A new California law, AB5, went into effect on January 1, 2020 which may require some or all of those currently serving as independent contractors to convert to employee status.
OVERVIEW
Most simply, AB5 changes the test used to determine whether a worker is classified as an employee or independent contractor. The intent of the bill is to extend to independent contractors the rights, benefits, and protections currently only available to employees, and was originally enacted to strengthen protections for gig-economy workers, such as drivers for ride-sharing services and other similar professions.
While there are already some designated exemptions from the law for certain arts and culture professional services (freelance writers, grant writers, graphic designers, marketing services, photographers, fine artists, and human resources administration services), additional lobbying will be needed to include other types of independent contractors currently working in the creative sector. This could range from theatrical performers, directors, designers, technicians, and choreographers, to musicians, curators, teaching artists and other professional services that have yet to be defined and/or exempted in the law.
At this juncture, the best advice is for organizations to seek counsel from a lawyer, human resources professional, or a CPA to assess which of your workers that you may need to covert to employee status. While this law is intended to simplify the designation between independent contractors and employees, there are still many gray areas, and professional advice will help protect you and/or your organization.
EXPLORE RESOURCES
Californians for the Arts (CFTA) has been exploring the potential unintended impacts of this bill on the arts and culture sector for the past year, and has lobbied for exemptions and adjustments to the law. Lobbying efforts have been successful in obtaining the currently stated exemption for fine artists (to date, loosely defined as visual and craft artists who produce original work for sale), but they are continuing to lobby for an expanded definition to include “arts and entertainment workers providing services to tax-exempt organizations.” CFTA contributed to the following white paper, which is an excellent starting point to understand the law and how to navigate it:
Visit CFTA’s excellent and comprehensive resource page on AB5 HERE, and also explore their advocacy tools.
Teaching Artists Guild (TAG) provides a solid exploration of this issue in their article “Making Teaching Artists Employees”:
“Gaining the protections and benefits of the employee status for workers formerly classified as contractors may signal a new era for worker rights, but there are concerns from employers about the effects this will have on them, some of which are particular to the arts education community. TAG recognizes that small arts organizations may have a valid fear that this increase in payroll expenses and related costs will push them out of existence; larger organizations with more established programs may handle the expense by providing fewer services, which in the short term will affect teaching artists and students. In a field already challenged to provide necessary services…what will the effects of this law be?” (Read the full article HERE.)
California Lawyers for the Arts is a starting point if you or your organization does not already have access to legal advice or representation. Their intake form is available HERE. In addition, they published a toolkit resource document in February 2020 that summarized the law.
Advocacy vs. Lobbing for 501(c)3) Organizations is determined by the Internal Revenue Service. A few articles to read on how to determine the difference are available from the National Council of Nonprofits Advocacy vs. Lobbying page, or in the article “Yes, You Can–and Should! Nonprofit Advocacy as a Core Competency” from Nonprofit Quarterly.
Local Resources:
October 2019 AB5 News Bulletin, by Lisa Ann Hilario, Spaulding McCullough & Tansil LLP (Santa Rosa) – a step-by-step guide to using the ABC and Borello tests to determine worker classification
Coalition of Community Artists, a newly formed advocacy group of Bay Area artists and organizations (primarily theater, but open to all)