Do new laws spell the end of independent contractor jobs in America — including our freelance-writing jobs?
If you’ve heard about new freelancer laws, but don’t know quite what’s going on — or wonder what you can do to protect your career and income — this post lays it out for you.
Quick version: New laws are coming online that place restrictions on who can freelance for what sort of company or organization. You need to understand what’s happening, so that you can thrive as a freelance writer.
I’ve got some action items that will help you move forward and stay in control of your freelance future. But first, let’s review what’s happened and why, so you understand the changes, and where your freelance writing biz fits into the picture.
The trouble with freelancers
First off, let’s have a frank discussion about the world of freelancing. In the decades of my working life, we’ve seen a major shift from corporate employment to independent contractor jobs.
Once, freelancing was only something you did out of desperation, while you frantically looked for another full-time job.
It depends on who you ask. Statistics are tricky, as some studies count anyone who freelanced once all year, and others only count full-time freelancers.
But the bottom line is that independent contractor income is a meaningful and growing portion of our economy. Some love being freelancers, while others would love to find a job, but can’t.
More freelancers — good or bad?
The truth is, in the freelance economy, fewer people now have employee benefits like:
- Retirement funds
- Vacation pay
- Sick pay
- Collective bargaining
- Strike rights
- Unemployment insurance, and more.
The tax burden shifted off of companies and onto independent contractors…some of whom work ‘off the books’ or under the table, evading taxes.
And it’s created two competing issues:
1. This trend alarms some parties, including labor unions and tax collectors. Also, people who’d love to get an increasingly rare, hard-to-find staff writing job.
2. On the other side of this coin, many of us are thrilled to give up all that to work where and when we want. We’d rather be shot than be trapped in an office cubicle all day, working for The Man.
Things were in a reasonable balance, before the Internet and Google ads threatened newspaper journalism’s survival. Around the same time, a new business model arose that blew up the whole norm of companies having staff, but using a few freelancers on the side.
Along came Uber
When Uber and Lyft began to challenge the taxi-license monopolies, everything shifted. Now, high-flying entities that operated with nearly 100 percent freelancers attracted billions in venture capital money and became publicly traded companies.
The cabbie conundrum
In the case of these freelance cabbies, drivers were being asked to risk their own vehicle and their lives, taking strangers into their cars for a fare.
That struck many as wrong. As flagrant worker exploitation.
So new laws began to arise to stop all-freelance business models. Despite the current hue-and-cry, the watershed law designed to rein in the spread of freelancing isn’t AB5. Laws began changing back in 2018, with a landmark California supreme court ruling.
Know your ABCs
The rules began to change with a case that challenged an overnight-delivery company’s use of independent-contractor drivers, Dynamex Operations West, Inc. v. Superior Court of Los Angeles.
In the past, labor laws let companies tell the IRS and state tax authorites who was an employee, and who an independent contractor.
Often, exploited contractors who worked long-term, onsite contracts and should have been employees unite to sue major corporations and are reclassified, or receive lucrative settlements to cover lost benefits. (With over 50% independent contracts, Google is at risk for such a suit right now.)
The Dynamex ruling took a new viewpoint. It says all workers are employees, unless the company can prove the worker is a contractor.
To help categorize workers, the ruling picked up on a simple set of rules from a Massachusetts labor law from the ’90s.
Known as the ABC rules, they are:
A) the worker is free from the control and direction of the hiring entity in connection with the performance of the work
(B) the worker performs work that is outside the usual course of the hiring entity’s business; and
(C) the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed. There are many facets to qualifying under this standard — including becoming a registered business or LLC, and getting paid by the project, rather than by the hour.
In plain English, you aren’t micromanaged or required to be in your client’s office, your client’s main business isn’t the thing you do, and you have an established business doing this kind of thing, that has multiple clients, not just one.
The IRS has long had A and C as part of its own rules for who’s an employee or a contractor, by the way. The big new monkey wrench is rule B.
Since newspapers, magazines, and many websites primarily create articles, freelance writers for these outlets can’t pass that B test. The law is saying these organizations should only use staff writers.
We all know that’s insane, because today’s struggling print publications and startup online sites can’t afford that. Nor can they get the diversity of voices they want that way.
Crusading for more staff writing jobs
It’s important to note that not all freelance writers and their organizations are unhappy with the idea of making companies use more staff writers. In fact, the National Writers Union is an enthusiastic supporter of AB5 — see them discuss why in this video.
What Writers Should Know About AB5
Posted by National Writers Union on Wednesday, January 22, 2020
Some feel that placing greater limits on use of freelancers will force organizations to hire more staffers and create more well-paid, full-benefit jobs. Which sounds great on paper.
BUT. With the state of print journalism revenue today, that’s likely a pipe dream.
Once Dynamex came down, it fell to the California legislature to decide how that ruling would look in practice. That’s where AB5 comes in.
What AB5 says — and why it created panic
In the wake of Dynamex, California Assembly Bill 5 was passed in Fall 2019, to codify the new labor rules businesses would follow. Key points to know:
- ABC rules apply. AB5 reiterates the ABC rules as California law, casting doubt on whether freelancers can write for any print or online outlets whose primary business is articles or blog posts.
- The 35 limit [corrected]. In an industry-specific provision, AB5 says freelance writers can only write a maximum 35 pieces for a client per year. This is a life-altering bombshell for writers creating daily content for websites, and weekly columnists or reporters covering sports and other local events.
- You must be a ‘professional services’ business to freelance. To operate as an independent contractor, you must have a registered, defined, independent business that contracts for work with your clients. How this is determined is complicated (see the Borello test), but the conventional wisdom is that you should register your business and, ideally, should become an LLC — a step with significant initial and annual costs.
The earthquake for independent contractor jobs
What made AB5 an earthquake for freelancers is its quick rollout. Major labor-law changes would usually have a gradual phase-in, giving everybody time to understand the new rules. Bigger companies might have to comply in year one, smaller ones a year later. (This happened with Seattle’s $15-an-hour minimum wage law, for instance.)
Instead, AB5 took effect for everybody on Jan. 1, 2020, shortly after it was passed. This created a mad scramble to understand and follow the law, by both freelancers and companies.
Vox Media layoffs are just the beginning
That’s the mess we’re in right now, where some California companies are laying off all their freelancers, and even companies based elsewhere (mostly notably Vox Media, which laid off 200 freelancers Jan. 1) are laying off all their California freelancers, out of fear they might run afoul of AB5.
It’s a disaster for many freelancers already, as you can see from reading the busy Facebook pages of the startup organizations Freelancers Against AB5 and California Freelance Writers United, among others.
The American Society of Journalists and Authors (ASJA) is among the professional organizations that are suing the state of California over AB5. The future may hold still more legal changes that affect us as freelancers.
10 action steps for freelance writers
So — what’s a hard-working freelance writer to do, in this time of changing labor laws?
First off, don’t panic. There’s a basic reality that many people love the freedom of freelancing, and don’t want to be corporate drones — and that companies love the savings they get using freelancers. That means some powerful, deep-pocketed parties want freelancing to continue.
But how you operate as an independent contractor is changing. To make sure you keep growing your freelance biz, here are some action items:
1. Prepare for chaos
There’s a lot of confusion out there, especially on the question of whether becoming an LLC will help you keep your clients. (A meeting with California employment officials this week seemed to confirm that being an LLC will not solve the problem if you’re freelance writing for news outlets. It only works for businesses that primarily sell a different product or service than writing. So that’s distressing.)
It’s going to take a while to get sorted. Follow the news on what AB5 means and doesn’t, and educate clients when needed.
Realize that some clients may freak out and get rid of some or all of their freelancers, even though they’re in the clear legally. Don’t fear this, prepare for it by actively marketing for more clients so you have leads coming in, just in case.
2. Don’t assume you’re safe outside CA
While AB5 most immediately affects California-based companies and freelancers, we all know that ideas from the Golden State often roll out nationally. Other states, prominently New York and New Jersey, have already proposed similar laws.
3. Professionalize your business
We’re still getting the full sense of what AB5’s ‘business-to-business’ exception will mean. But consider this your wake-up call to stop working under the table. It appears that’s not going to be a good future option.
Register your business with your state and city, even if it’s as a sole proprietor, but ideally as an LLC (cheapest route will likely be a legal site such as LegalZoom).
Get a federal EIN number — it’s free (but make sure you’re on the legit IRS site for that, and beware of scam sites). These moves help convince IRS to allow your freelance deductions.
Yes, there are costs to this. Remember to charge more to cover them.
Besides potentially gaining a larger client base (big companies and government agencies like to hire LLCs), being a registered business has many benefits. You can write business expenses off your taxes, build a Social Security fund for yourself, and contribute to the welfare of society, keeping our roads, police, fire, and other services running.
4. Consider partnering
If there are 52 weeks in the year and you’re a weekly columnist, do the math — maybe you could split a column with another journalist and each write 26 items? Would be better than nothing, while we work to amend the 35-article limit.
Yes, this assumes the client is willing to work with you as long as you’re under that figure. Weirdly, chatter on the anti-AB5 Facebook boards indicates some news outlets are continuing to use freelancers, but don’t want to exceed that limit.
5. Diversify to survive
If you’ve been doing nothing but local sports coverage, realize you need fingers in more pies. Weekly coverage of local activities is square in the sights of AB5, and it’s unlikely newspapers will do as AB5 drafters hope and make you a staff writer.
It’s time to reinvent yourself — and really was anyway, because these sorts of local-coverage gigs always paid too little.
6. Don’t take onsite contracts
If a company asks you to come work in their office to write, even for a few months, beware. AB5 makes it very clear that you can’t be considered an independent contractor if you work onsite.
These are often full-time jobs in disguise, the exact type of freelance gig that AB5 aims to reclassify. Tell them that doesn’t comply with the law, and you need to work at home to keep your freelance status.
7. Push back on non-competes
Now more than ever, writers can’t sign contracts that forbid them to write for competitors. Having many clients you write fewer than 35 pieces per year for is the only way to survive and still comply with AB5.
Noncompete clauses have always been illegal (they violate FTC rules on restraint of trade) — now, they’re completely untenable.
8. Get creative on contracts
Don’t know if I’m crazy, but what occurred to me immediately when I learned of AB5 is that if you want to freelance, and a company wants to hire you…how you structure your contract is up to the two parties.
Couldn’t it appear on an invoice that 4 pieces you write in a month are part of a single project, for instance? Don’t know what’s stopping us from just billing once a month for ‘services’ without defining how many pieces we wrote.
Not that I’m telling you to do anything illegal or anything <cough>. But likely enforcement will focus on some of the largest news outlets…and many others will skate under the radar. Just a thought.
Also, don’t assume all your clients will immediately freak out and blow up their contractor model. Some writers are reporting that current contracts clearly don’t comply with AB5, and their clients don’t seem to care.
Some companies may do business as they have, until sued. For most companies, that will likely be never, as enforcement tends to focus on the most high-profile offenders. Look for companies that have an independent streak — they may be your best freelance opportunities in future.
9. Focus on business writing
One thing AB5 makes clear: If you register your business, and freelance for companies that offer some other main product or service than writing… you’re in the clear. If you blog for a plumbing company, or write white papers for a financial-services consulting firm, there’s no issue.
The journalist in me weeps to say that, because we’ve never needed independent reporting and a strong news media more than we do right now. But until this gets sorted out, tread carefully when you contract with news agencies.
And let’s hope more staff-writing jobs are in the offing. Vox did create 20 new part- and full-time staff positions, after its layoffs.
10. Join the fight
If you’re angered by the restraints on freelancing posed by AB5, fight back! Two organizations’ Facebook pages were mentioned above, and there are many more. Another good group to know is Fight for Freelancers NJ, which has successfully defeated a proposed AB5-like bill in their state.
AB5 doesn’t just affect writers, so protest coalitions are being built across industries. Though doctors and a few other categories of professionals are exempt, affected categories include translators, truck drivers, actors, designers, and many more.
Join the movement to preserve our freelance freedom. Organize. Lobby. Write. Call. Tell your story. Don’t just sit back and let legislators take away your way of life.
Independent contractor jobs will survive
With all these changes, it’s up to us to find the freelance writing situations that still work. And to advocate for laws that allow us our freedom. I believe we can have that, while still supporting the need for the Fourth Estate in our society and pushing back against all-contractor business models such as Uber’s, which clearly exploit workers in dangerous working conditions.
The changes going on now may feel scary and overwhelming, but labor law is always changing. Stay informed, and consult an attorney if you feel you need advice.
Don’t freak out and give up. Freelance writing isn’t going away — too many companies benefit, and too many of us love the freelance lifestyle. Independent contractor jobs will survive this.
What’s your take on AB5? Leave a comment and let’s discuss.