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Following California’s passage of the AB-5 bill, which goes into effect on January 1, New Jersey, New York, and several other states are considering similar legislation that would potentially reclassify millions of independent contractors.
These laws would impose narrower definitions of contractors and employees that could limit freelancers’ ability to work independently. Advocates behind the legislation argue that the gig economy and on-demand platforms are fueling a race to the bottom, by incorrectly classifying their workers as independent contractors in order to drive down wages and withhold benefits.
For a portion of the gig economy, this assertion is right. Misclassification is an issue for many workers who would do better as employees, and lawmakers are right to address it as the freelance economy expands year over year. Freelancers Union supports efforts to combat misclassification where it exists, and recognizes the exploitation of many workers in the gig economy. However, we must make sure that new legislation does not impact the livelihoods of the independent professionals who choose to freelance across nearly every sector of the economy.
One in 3 US workers is a freelancer — that’s 57 million Americans. Every day, more independent professionals are choosing to freelance because of the autonomy and flexibility this work offers-- many say that freelancing is the most lucrative way for them to earn a living. For these workers, the long-term solution is to provide better protections and benefits to all workers, regardless of employment status.
How these laws would work
AB-5 and other recently proposed legislation are modeled on an “ABC test” to determine employment status. Simply, the ABC test significantly narrows the scope of work for which businesses may classify workers as freelancers. Under the law, a worker can only be classified as a freelancer if the following conditions are met:
- The worker is free from control and direction in the performance of services;
- The worker performs work that is outside the usual course of the hiring entity’s business; and
- The worker is customarily engaged in an independently established trade, occupation, or business.
Clause B, which requires that freelancers perform work outside the “usual course of the hiring entity’s business,” arguably has the most potential to restrict freelance work — as many freelancers perform services for companies that touch upon the core of their business. Freelance writers, technologists, marketers, creatives, and consultants all frequently provide core services.
These legislative moves have caused legitimate concern among a broad coalition of freelancers and advocates, who have spoken out against AB-5 in California (also here, here and here) and against proposals in New Jersey (also here). Public debate has led to better understanding of some of the laws’ unintended consequences, and broader commitment among policymakers to take these concerns into account when crafting future legislation.
What you can do
Freelancers Union has been meeting with policymakers and advocates at the center of these bills since this debate began in California about the AB-5 legislation to make sure that independent professionals have a voice in the conversation. As legislation moves forward in New York, New Jersey, and other states, we will continue to advocate on behalf of our members who choose to freelance.
In order to do so effectively, we need to hear from you. We are collecting member insights and testimonials about the ABC classification laws and how they may impact your business. Please take a moment to complete our brief survey, and indicate whether you’re willing to share your story or participate in campaign activities. We will continue to update our members as we have more to share on these issues, and, as always, we welcome your thoughts at email@example.com.