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Why We Are Suing California Over A ‘Labor’ Law

‘Gig Economy’ Law Raises Constitutional Issues for Journalists

By Mickey H. Osterreicher and Alicia Calzada

The National Press Photographers Association (NPPA) expends a great deal of time and energy advocating for and defending the First Amendment rights of its members. But we know that if visual journalists can't earn a decent living, the ability to gather and disseminate news will be greatly diminished. That's why we also put so much effort into protecting and improving copyright law. It's also why, in 2019, a California bill related to independent contractors caught our attention. The bill, called AB5 (Assembly Bill 5, codified at Cal. Labor Code § 2750.3, et seq.), codifies and expands the independent contractor test established in Dynamex Operations West, Inc. v. Superior Court of Los Angeles, 4 Cal. 5th 903 (2018).

Under Dynamex, independent contractors must be classified as employees under certain California wage orders unless the hiring entity satisfies a new three-part test: (A) that the worker is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact, (B) that the worker performs work that is outside the usual course of the hiring entity's business, and (C) that the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed for the hiring entity. Id. at 964. See also Cal. Labor Code § 2750.3(a)(1). Failure to prove any element of the Dynamex ABC test results in the independent contractor being classified as an employee.

The Dynamex ABC test overruled a prior multi-factor balancing test that considered the economic realities of the employment relationship. See S. G. Borello & Sons, Inc. v. Department of Industrial Relations, 48 Cal. 3d 341 (1989).

Under Borello, freelancers like NPPA members represented in the recently filed lawsuit are classified as independent contractors and have been for decades.

Dynamex was limited to the "suffer or permit to work" standard in California wage orders and "equivalent or overlapping non-wage order allegations arising under the Labor Code." Gonzales v. San Gabriel Transit, Inc., 2019 WL 4942213, *14 (Cal. Ct. App. Oct. 8, 2019). Wage orders govern issues like minimum wage, overtime pay, meals, and lodging. Professionals engaged in "original and creative" work, like NPPA members, are largely exempt from wage orders, and thus Dynamex had little direct effect on their work.

AB 5 applies the strict Dynamex ABC test to the entire Labor Code, the Unemployment Insurance Code, and wage orders. Cal. Labor Code § 2750.3(a)(1).

This expansion of the ABC test means that freelancers, like writers, editors, photographers, and videographers, must be classified as employees of the publishers for which they produce content because content creation is "the usual course of the hiring entity's business." Cal. Labor Code § 2750.3(a)(1)(B).

AB 5 also contains several exemptions to the ABC test, including people who work pursuant to "a contract for 'professional services.'" Cal. Labor Code § 2750.3(c)(1). These exempt professionals remain subject to the existing Borello independent contractor test. Under AB 5, "professional services" are defined as those provided by marketers, human resources administrators, travel agents, graphic designers, grant writers, fine artists, IRS enrolled agents, payment processing agents through an independent sales organization, estheticians, electrologists, manicurists, barbers, and cosmetologists (see: Cal. Labor Code § 2750.3(c)(2)(B)(i)—(viii), (xi).

Still photographers, photojournalists, freelance writers, editors, and newspaper cartoonists are also included in "professional services," but with important limitations: (1) these speaking professions are limited to 35 "content submissions" per client, per year, Cal. Labor Code § 2750.3(c)(2)(B)(ix) and (x); and (2) video is expressly excluded from the still photography and photojournalism exemption. Cal. Labor Code § 2750.3(c)(2)(B)(ix). AB 5 does not exclude audio recording from the definition of professional services. The 35-submission cap in Cal. Labor Code § 2750.3(c)(2)(B)(ix) and (x) limits freelancers' ability to record, sell, or publish audio content. The 35-submission cap in Cal. Labor Code §2750.3(c)(2)(B)(x) only applies to "items or forms of content by a freelance journalist" that meet the other requirements of § 2750.3(c)(2)(B)(x).

Concerns with AB5

Under the terms of AB 5 a freelance visual journalist would be classified as an employee, even if they do not want to be. An automatic conversion to employee status would jeopardize copyright ownership of the work created, which photographers and writers often relicense for additional income. The default in copyright law is that an employer owns the copyright to the images made by their employees (such a staff newspaper photographers). Cmty. for Creative Non-Violence v. Reid, 490 U.S. 730, 751 (1989). On the other hand, an independent contractor usually retains their copyright by law, unless they relinquish or transfer it by written agreement. Id.

Other concerns for those impacted in California are significant new costs and disadvantages for both freelancer-turned-employee and their client-turned-employer. For one thing, there is a drastic shift in the ability of the former freelancer to deduct their business expenses on their federal income taxes. Independent contractors can deduct business expenses including professional memberships, educational and networking conferences, travel, equipment, home offices, insurance, and other expenses, which an employee is not able to deduct. They are also able to maintain benefits like healthcare and retirement accounts, regardless of the number of clients they produce content for or the frequency and quantity of their work. Additionally, the client is now faced with unemployment taxes, workers' compensation taxes, state disability insurance, paid family leave, and sick leave. While some of these costs are borne by the now-employer, others are an additional burden on the journalist. These all make the freelancer's work more expensive to the client-turned-employer. As a result, clients are reducing the amount of work given to California journalists, and some have stopped doing business with California journalists entirely.

For many journalists, control over their workload and lives as well as the flexibility and safety in not being tied to any one employer or set schedule helps to minimize risk for freelancers in an uncertain and tumultuous industry that continues to lay off employees.

Additionally, many publications have simply stopped using California photographers and videographers, either entirely, or after 35 assignments. We have heard from members whose clients are doing exactly that. One NPPA member told us that he is going to lose two-thirds of his revenue from one client. Another will face more than $10,000 in lost assignment work. NPPA members impacted by the law range from retirees who will be losing extra income to mid-career professionals whose journalism clients are part of their overall business model. One told us that the flexibility of freelancing allowed him to stay at home with his young children instead of putting them in daycare. All the impacted members we spoke with are experienced journalists, trained in ethics and professional standards, who keep their local community informed on matters of public concern. Their voices will be silenced, and the public will have its right to receive information impaired when the impact of AB 5 hits their businesses.

Legal Challenge

While it is unusual for NPPA to address state labor laws, we decided it was extremely important to deal with our members' concerns by becoming plaintiffs along with American Society of Journalists and Authors (ASJA) in a challenge to some of the terms of this onerous law. Represented by Pacific Legal Foundation, we filed a civil rights lawsuit in Los Angeles federal court on December 17, 2019, that "seeks to vindicate the constitutional rights to free speech, the press, and equal protection for our members" which are "impaired, threatening the livelihood of those who work as freelancers" in "violation of the First and Fourteenth Amendments to the United States Constitution and 42 U.S.C. § 1983." Because AB 5 treats journalists differently than other speaking professionals, and limits the amount, manner and type of speech, we believe it abridges the Equal Protection Clause of the Fourteenth Amendment and the Free Speech and Press Clauses of The First Amendment.

Under the AB 5 scheme, exempting some speakers who freelance while not exempting journalists is a content-based restriction, subject to strict scrutiny (see: Reed v. Town of Gilbert, 135 S. Ct. 2218, 2227 (2015)). Likewise, exempting still photographers and photojournalists who provide up to 35 still-image submissions per publisher per year while allowing no exemption for those who provide their clients with even a single video, is not narrowly tailored nor rationally related to any compelling or legitimate governmental objective.

The complaint further alleges that AB 5 singles out ASJA's and NPPA's members who are writers, editors, still photographers, and visual journalists by drawing unconstitutional content-based distinctions about who can freelance, thus expressly disfavoring journalistic speech.

For example, under AB 5, writers of marketing materials, such as press releases, can freelance without restriction; but if they write articles from that same press release, they are subject to the 35-submission limit. Similarly, a photographer may submit an unlimited number of images of a product to a client for marketing purposes, but if that photographer submits photographs to a newspaper to illustrate a story about that same product, they are subject to the 35-submission per client/per year limit. And, if instead of a still image the photographer submits video (often using the same camera with dual capabilities), they must be immediately classified as an employee rather than a freelancer.

The lawsuit seeks a prospective declaratory judgment that "the challenged provisions (35-submission limit and the video recording restrictions under Cal. Labor Code § 2750.3(c)(2)(B)(ix) and (x)) of AB 5 are invalid, unenforceable, and void" as well as a "permanent and preliminary injunction against any further enforcement of the challenged provisions; plus costs and reasonable attorney fees." On 12/31/19, after the state refused to stipulate to a stay of enforcement of the provisions of AB 5 challenged in this case, an application for a temporary restraining order, as well as a motion for a preliminary injunction, was filed. The state filed its opposition on 1/1/20 and a reply in support of the TRO was filed on 1/3/20. Later that same day the court denied the TRO application even though a different judge hearing another AB 5 challenge granted that TRO (See, e.g., California Trucking Ass'n v. Becerra, No. 3:18-cv-02458-BEN-BLM (S.D. Cal. Dec. 31, 2019). A hearing has been set for March 9, 2020.

Mickey Osterreicher is NPPA General Counsel and Alicia Calzada is NPPA Deputy General Counsel. NPPA and ASJA are represented in the lawsuit by Jim Manley and Caleb Trotter of the Pacific Legal Foundation.
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