Prop 22: Contractor or Employee?

Defining who is an employee and who is an independent contractor is a critical labor topic being addressed by Congress, the Trump administration, the courts, and state legislatures. It has particular relevance for writers of all types.  In California, the National Writers Union has supported AB 5 and AB 2257 and now opposes Proposition 22 in the upcoming election on November 3. 

Chafing under the implied employer designation of their drivers, Uber, Lyft, Instacart and Door Dash have paid to put Prop 22 on the ballot as a carve-out specifically for their industry. They’ve spent more than $180 million to back the measure, more than any ballot initiative in US history. Why? To avoid paying into their workers’ Social Security, Medicare, unemployment insurance, workers comp and sick leave.

If passed, Prop 22 would, in effect, reverse the Dynamex decision. Prop 22 would eliminate the safety protections for riders and drivers and any company liability that results from classifying drivers and other workers as employees.

Organized labor is concerned that passage of this law could set a dangerous precedent and provide a low pay, no protection model for other industries to adopt. We urge Californians to VOTE NO ON PROPOSITON 22.

Here is the backstory on the battle leading up to Prop. 22.

The unanimous decision of the California Supreme Court in the case of Dynamex v. Superior Court in April 2018 was important in expanding California workers’ rights.  The ruling stands to have a major impact on companies who classify gig employees as independent contractors in an effort to avoid the costs of everything from workers compensation to unemployment insurance. 

In the Dynamex decision, the California Supreme Court court adopted an “ABC test,” already in use in Massachusetts and other states, as a way to determine whether California workers are “employees” or “independent contractors.” If workers met each of the following three factors, they were now legally considered contractors:

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

The three factors were consistent with the criteria developed by the IRS to determine contractor status: behavioral, financial, and relationship type.

Assembly Bills 5 and 2257, signed into law in August 2019 and September 2020 respectively, were efforts by supporters of organized labor to codify and clarify the benefits of the Dynamex decision, and to carve out limited exceptions for some traditional freelancers. The California Federation of Labor supported the Dynamex decision and both follow-up bills. The labor federation argued that if a company had the right to hire and fire “contractors,” then they were, in actuality, employees.

In the case of freelance writers, musicians, and photographers who didn’t want to be swept up in this battle for economic justice, legislators decided in AB5 that if these professionals performed less than 35 assignments per year for a  single client publisher, as works-for-hire, they were entitled to keep their freelance contractor status.

This “carve-out,” while seemingly established with an arbitrary ceiling, was agreed to with the promise that Sacramento would revisit the law in the very near future. Eight months later, AB 2257 passed with an urgency provision, which meant it was implemented immediately, to clarify certain aspects of AB 5, and threw out the 35 works-per-year cap and new standards were established.  

Included in AB 2257 was an additional business-to-business service provider exemption, allowing small companies and sole proprietors to work contractually with a larger company while retaining their independent contractor status. 

This newer law clarifies the definition of professional services to include as it relates to the writing and related professions:

  1. Marketing
  2. Graphic design
  3. Grant writer
  4. Fine artist
  5. Photography and videography including photojournalism
  6.  Services of a freelance writer, translator, editor, copy editor, illustrator, or newspaper cartoonist with a written contract that specifies the rate of pay, intellectual property rights, and obligation to pay by a defined time, as long as the individual providing the services is not directly replacing an employee who performed the same work at the same volume for the hiring entity; the individual does not primarily perform the work at the hiring entity’s business location, and the individual is not restricted from working for more than one hiring entity. 

For California writers, or writers for California clients, who prefer to be classified as independent contractors, it is now essential to have (1) a written contract spelling out (2) the rate of pay (per hour or for the job), (3) the payment due date, and (4) which rights are being granted (e.g. “exclusive rights for six months from the date of delivery, and non-exclusive rights in perpetuity, to publication on the website”). Without such a contract, you could be deemed to be, or to have been, an employee, and your work could be deemed to be, or to have been, “work for hire” to which the client owns the copyright.

AB 2257 also avoids an unintended “employment relationship” at a single-engagement event. For instance, if a writer and photographer are hired separately to cover a one-day event and meet the criteria for separate businesses with separate contracts, business addresses, there is clearly no intent to circumvent a law meant to protect exploitation of employees as contractors.