What’s up with California’s new freelance law?

  • 15 November 2019
  • Freelance
  • Rosalyn Page

As though trying to make a living as a freelancer wasn’t hard enough in 2019, now a new California law could threaten the livelihood of freelancers in the US. While we don’t have anything similar in Australia, it’s worth taking a look at it, who it’s designed to protect and its unintended consequences for freelancers.

Briefly, California’s new freelance law restricts freelancers and independent contractors to 35 assignments in a year. It’s intended to provide safeguard from insecure work, but as it relates to freelance journalists, some say it hinders their work prospects, while others say it’s a protection from media organisations shedding salaried employees for contractors.

About California’s Gig Economy law

In 2018, California’s Supreme Court tightened the rules around when a worker can be classed as an employee instead of an independent contractor. Back in the 1990s, the US department of Labor said that the single most important factor in determining which workers are covered by employment and labor statutes is the way the line is drawn between employees and independent contractors.

The definition has wide-ranging implications for both the workers and the business. It puts it this way: in recent years, the relevant regulatory agencies of both the federal and state governments have declared that the misclassification of workers as independent contractors rather than employees is a very serious problem, depriving federal and state governments of billions of dollars in tax revenue and millions of workers of the labour law protections to which they are entitled.

And what’s caused the angst, is that in October a statute was enacted based on the 2018 decision, which formalises and expands the definition. There are some exemptions, about a dozen of them, that include travel agents, doctors, stockbrokers and even fisherman, but not journalists.

Defining a freelancer vs an employee

It imposes a three-step ‘test’ to determine if someone is a freelancer and states that employers are permitted to contract out work which is “outside the usual course of the hiring entity’s business”. In the case of the media, by the definition alone, organisations would not be able to use freelance journalists, editors, photographs and anyone else providing content and services the same as in-house employees. Crazy, eh, when it comes to media organisations, but you can see the intention when considering workers for Uber, Lyft and other gig businesses.

However, there were some other exemptions; in particular, one for journalism which allows freelancers up to 35 assignments per news outlet per year without being defined as an employee.

What this means is that any freelancers based in California, irrespective of whether they’re working for media or creative businesses in California or elsewhere in the country, are subject to the conditions imposed by the new law, which comes into effect in January 2020. 

If you’ve got a regular arrangement with a media outlet, particularly freelancers who are writing daily news stories, it’s not going to be hard to max out the 35-piece limit.

There’s been a spirited debate on Twitter, where else, on the merits and risks of the new law, with journalists lining up on both sides, along with lawmakers and interested parties to have it out. Media companies don’t seem to like the bill because among other things they’ll need to use a big pool of freelancers, gig businesses like Lyft and Uber stumped up big money to stop it, while some say it will curb media outlets letting go of employees in favour of freelancers. There also seems to be confusion around how exactly to define an assignment when tallying up the numbers to 35.

What’s the situation in Australia?

Right now we don’t have any laws that specifically relate to freelancing, but issues to do with the gig economy have been considered by government and agencies.

Freelancers in Australia are categorised as independent contractors by the ATO for taxation purposes. You need an ABN (Australian Business Number) and to charge GST, depending on the value of your business. In relation to payments, freelancers can lodge a complaint with the Australian Small Business and Family Enterprise Ombudsman about non-payment or unfair payment terms or conditions. There’s more details on the legal aspects of being a contractor at the link below.

There was an investigation by the Fair Work Ombudsman (FWO) into Uber and how it classifies its drivers and in mid-2019, the Ombudsman released the final report, ruling that they should not be classified as employees. The Labor party and some unions had been pushing for the drivers to be formally recognised. However, there’s been some confusion with drivers referred to as both employees and independent contractors including in an earlier case involving Deliveroo and the FWO.

A 2017 inquiry by the Small Business Ombudsman found that freelancers needed better protections, particularly when it comes to getting paid in a reasonable time. In the US, New York has gone so far as to have a freelancing law for the city which ensures freelancers who are supplying $800 worth of work or more over a 120-day period have the right to a contract that stipulates the scope of work, the rate of pay and the completion date. Similar protections have been mooted by the Small Business Ombudsman off the back of the 2017 inquiry, but there’s been nothing concrete to date.

A 2016 Senate inquiry into the gig economy to consider whether it aided tax avoidance by corporations through sham contracting found it’s either flexibility in work or work without protections, depending on your point of view. In particular, it found that, to its proponents, the gig economy is a brave new world allowing people to be masters of their own fate: to choose the work they do and for how much they do it. On the other hand, to its critics, the gig economy is dangerously unregulated and creates fertile ground for exploitation: the promise of choice rings hollow. It concluded by recommending workers have protections such as minimum wages and other conditions, and regulations need to be considered to prohibit corporate tax avoidance.

The Gig Economy and Freelancers

Some freelancers in the US have already reported that they have been dumped by media organisations they’ve had ongoing relationships with because of the impending restrictions, arguing it’s a direct hit on their livelihood and akin to an attack on press freedom. As I said at the start, as if making a living as a freelancer in a shrinking media industry with stagnant word rates wasn’t hard enough.

Recognising the changing media landscape, the MEAA (Media Entertainment and Arts Alliance) has created a FreelancePro membership that offers contract advice, professional indemnity and public liability insurance along with accreditation in the form of a media access card and a Freelance Pro trustmark for a professional website.

Freelance Resources

The Freelance Collective is a platform for freelance creative work

The Media Entertainment and Arts Alliance (MEAA)

Australian Small Business and Family Enterprise Ombudsman

This in-depth review of tax preparation software by Consumers Advocate compares the features and the pros and cons of different platforms.

Rosalyn Page

Rosalyn is an award-winning writer with a niche in digital lifestyle, technology, innovation and travel.

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