For music industry and magic shows, new exemptions from California’s AB 5

SACRAMENTO —  California lawmakers embraced a plan Monday to loosen the state’s year-old law that limits the use of independent contractors, providing new flexibility in a variety of professional and non-traditional jobs but failing to mollify critics who say the system remains too restrictive.

Supporters of Assembly Bill 2257 expect Gov. Gavin Newsom to sign the proposal into law this month. As urgency legislation, it would take effect as soon as he signs it into law.

“This bill strikes a balance and continues to provide protections for workers against misclassification that had previously gone unchecked for decades under the old rules,” said Assemblywoman Lorena Gonzalez (D-San Diego), the bill’s author.

Few topics have sparked more fierce debate across California, reflecting the complexity of the modern workplace and the steady growth in flexible employment opportunities, particularly in the app-based economy. In 2018, the California Supreme Court imposed a new strict test to determine employment status but left the Legislature to determine how to apply it to specific industries.

Last year, lawmakers wrote Assembly Bill 5 to codify the court ruling. But people employed in dozens of professions, adamant that they are not employees of the companies with which they work, insisted the Legislature come back this year and offer new exemptions. By February, 34 proposals had been introduced to retool the rules of AB 5 — including efforts by Republican legislators to repeal the 2019 law.

Liberal Democrats have argued that too many businesses have skirted workplace law for years and not provided the protections and benefits that come with being an employee. They have resisted most efforts to relax the provisions of AB 5.

The bill sent to Newsom on Monday offers some concessions, though fewer than business groups want. Perhaps most notably, it does not provide exemptions for those who work as drivers for app-based companies such as Uber, Lyft and Doordash. Those companies have launched a $110-million political campaign to have voters reclassify their drivers through the passage of Proposition 22 in November.

The companies are also embroiled in legal fights with the state over the employment status of their drivers. In May, state Atty. Gen. Xavier Becerra filed a legal challenge against Uber and Lyft’s business practices. Earlier this month, the companies threatened to shut down their California operations but backed away from that plan after they were given additional time to respond to the state’s lawsuit.

AB 2257 addresses lower-profile but persistent criticisms about business practices that have had to change since the enactment of the 2019 law, what Gonzalez called the result of “continued dialogue” over the topic of how to define employment.

The bill casts a wide net in identifying business relationships that are exempt from requiring work to be done by an employee. Many real estate, home inspection, underwriting and financial services could be provided by independent contractors under AB 2257’s provisions. New clarifications would also be applied to exempt business-to-business contracting and services offered by those who have a sole proprietorship or limited liability corporations.

If signed into law, the bill provides broad acceptance for the use of independent contractors in the music industry, including those who create, market and promote sound recordings. AB 2257 also makes provisions for some musicians and vocalists and photographers whose assignments include album covers and publicity photos.

Other services, such as youth sports coaches and pool cleaning, would also be exempt from employee status. And freelance writers, photographers and illustrators who want to work as independent contractors would no longer be subject to a limit of 35 assignments per year, a limit created by AB 5 and frequently criticized on social media.

Many of the state’s newspapers, including the Los Angeles Times, successfully lobbied last year for an exemption from classifying newspaper distributors and carriers as company employees. AB 2257 and a separate bill by Assemblywoman Blanca Rubio (D-Baldwin Park) would provide an extension of those exemptions until Jan. 1, 2022. Both bills now await action by Newsom.

But in offering assurances that a wide assortment of jobs can be done by independent contractors — architects and accountants, investigators and illusionists, psychologists and puppeteers — the bill sends an implicit message that, in many more cases, the limits imposed by the 2018 court ruling and AB 5 aren’t likely to be revisited by the Legislature’s Democratic majority.

Supporters of the 2019 law say that many businesses have successfully adjusted and the new modifications should not be seen as a sign that the law needs sweeping revisions.

Although the bill received no debate on the Assembly floor on Monday, coming up for discussion with only about an hour before adjournment, Republicans in the state Senate sought earlier in the day to add a series of amendments expanding the various professions excluded from strict employee classification.

Senate Minority Leader Shannon Grove (R-Bakersfield) said the effort was to undo much of what AB 5 had put in place and that the new proposal “doesn’t go far enough to address the diversity of the workplace in this state.”