On this pop-up episode Patrice Onwuka is joined by Jim Manley to discuss AB5. This week on their last day in session, California lawmakers exempted a host of jobs from AB5, the job-killing law that is wreaking havoc on freelancers across the state and which may become law across the nation. Jim Manley, an attorney at Pacific Legal Foundation, joins us to discuss the latest on AB5 and his organization’s efforts to fight it. As a reminder, AB5 forces companies in the state to reclassify most independent contractors as employees eliminating flexibility and freedom for millions of freelancers. (Read IWF’s statement about the latest moves on AB5 here.)
Transcript
Beverly Hallberg:
Hey everyone, it’s Beverly Hallberg. Welcome to a special pop-up episode of She Thinks, your favorite podcast from the Independent Women’s Forum, where we talk with women and sometimes men about the policy issues that impact you and the people you care about most. Enjoy.
Patrice:
Hi everyone, I’m Patrice Onwuka, Senior Policy analyst at the Independent Women’s Forum. Welcome to a special pop-up episode of She Thinks, your favorite podcasts on the Independent Women’s Forum, where we talk with women and occasionally men about the policy issues that impact you and the people you care most about. Joining us today is Jim Manley, an attorney at the Pacific Legal Foundation, to discuss the latest on AB5, the job killing law that is wreaking havoc on freelancers across the state, and serves as a model for other states, as well as the nation.
As a reminder, AB5 forces companies in the state to reclassify most freelancers as employees. Now, Jim litigates in defense of free speech, economic liberty, and property rights. For more than a decade, he has been fighting to protect and expand freedom through strategic litigation and policy making. But before joining Pacific Legal, Jim litigated at the Goldwater Institute and the Mountain States Legal Foundation. He lives in Phoenix with his wife, Marlene, and their kids, Milton and Cora. And I understand they have a dog named Dolly Madison and a cat named Martha Washington. Jim, welcome to She Thinks.
Jim:
Thanks for having me, it’s a pleasure to be here.
Patrice:
Terrific. I’m sure we’ll circle back at the end about Martha Washington and Dolly Madison, but let’s get to the important stuff of the day. So tell us more about the Pacific Legal Foundation. Why was your organization created and what do you do there?
Jim:
Well, Pacific Legal Foundation is the oldest public interest legal foundation dedicated to litigating for individual rights. And so, we file lawsuits all over the country fighting for property rights, economic liberty, fighting against government overreach in environmental regulations, and also fighting for free speech. And that is really what brought us into this fight over AB5, because in addition to being really bad economic policy, AB5 also has significant constitutional problems under the First Amendment because of the way it treats freelance writers and photographers.
Patrice:
Gotcha. Well we’re going to get into that in a moment. But just for everybody’s sake who’s listening, right now the state of play is that a legislative attempt to repeal AB5 has failed, including one that happened last week. We’ve got legal challenges, like the one from your organization that we’re going to talk about in a moment, so those are still up in the air. And then we’ve got this ballot initiative called Prop 22 to exempt ride sharing drivers AB5. So there are still some different trains running on different tracks related to AB5, but that is the current state of play. And now even more current, Jim, is something that happened on the final day of session on Monday. Tell us what the California legislature has just done regarding AB5?
Jim:
Yeah. So a little bit of background will help put this into context. The way works is, if you are a freelancer and the work that you’re doing is in the usual course of the hiring entities business, then you basically can’t be an independent contractor. So if you’re a freelance writer working for a newspaper, your work as a writer is in the usual course of that newspaper’s business, and so you’re not allowed to be a freelancer. Now, that’s a terrible policy, because many of our clients’ members, we represent the American Society of Journalists and Authors and the National Press Photographers Association, many of their members have been making successful careers as freelancers for decades. And the same goes for folks who rent a chair in a barber salon and cut hair, or someone who does nails in a similar manner, or even a freelance lawyer who does contract work for a firm. All sorts of independent contractors, working, thriving in California and across the country. And California imposes this rule in AB5 that says, no, you’re not allowed to be a freelancer if your work is the same work as your client’s.
But because that’s such a bad policy, the legislature realized that, even as they were debating AB5, and so they enacted all of these exemptions. There were something like 50 exemptions in AB5 itself for various types of workers who would still be allowed to freelance, even though the AB5 tries to ban the practice. And so, what happened on Monday was what was inevitable. When the legislature starts carving out exemption after exemption, it’s going to miss some people, and it missed a whole bunch of people. And this bill that was passed by the legislature AB2257 adds about two dozen more exemptions to AB5. So we’re well on our way to 100 exemptions to this horrible policy. And some of those exemptions help our clients, but there are many, many freelancers in California who, even after Monday, are either left out completely, or left sort of in a gray area and they’re not really sure if they’re free to freelance in California.
Patrice:
Well talk about your clients and you’re lawsuit. I mean, you guys sued on behalf of the American Society of Journalists and Authors and the National Press Photographers Association. So tell us about the lawsuit, and also broadly talk about the different treatment, the unequal treatment of content creation in AB5. I mean, the difference between writers and people who do photography or graphic arts.
Jim:
Yeah. And so, yeah, we represent the American Society of Journalists and Authors and the National Press Photographers Association, and they have hundreds of members in California alone who have made thriving careers as freelance writers and photographers. Many of them have chosen the independent freelance path because they’ve had a terrible experience working in an office in the office environment, or being beholden to one employer and they like the freedom and flexibility of being in charge of their own client base, and being able to say no to a client if that client is difficult, or if they just need to take the time to care for a relative or focus on some other issue, freelancing gives them that flexibility. And AB5 threatened to take that away. Now, AB5 did provide an exemption for journalists, but as you’ve hinted at, it provided an unequal exemption.
So, there was this big, long list of professional services that are exempt under AB5, and you can still freelance if you’re on this list of professional services. It includes things like graphic design, marketing, grant writers got their own individual exemption, a whole bunch of licensed professionals like lawyers and architects are included in the list. It’s a long list that includes journalists, but journalists were the only professionals who speak for a living who had a limit on the amount of speech that they could do as a freelancer. So under AB5, journalists, both writers and photo journalists, were limited to 35 submissions per employer per year. And if that sounds arbitrary, it was. The author of AB5 admitted that it was arbitrary. Basically they just wanted to put a cap on the amount of work a freelancer could do in order to get rid of freelancer jobs, because there was this prejudice baked into AB5 against independent contracting generally.
And so, journalists were stuck with this 35-submission limit, which created this incredibly peculiar and unconstitutional situation, where if you’re a marketing professional you’ve got a full exemption under AB5, so you can do freelance marketing projects all day long, writing press releases, maybe. But if you’re a journalist writing about those press releases, you’re limited to 35 submissions per client, per year. And what that means is, you’re basically going to have a hard time working as a freelance professional, because once you hit that 35 submission cap, you’re done with that client, and there are only so many folks to sell your writing and photography to. And so that unequal treatment is a constitutional violation, because your freedom to freelance depends on what you have to say. If you’re producing speech that is marketing, then you’re free to freelance, but if you’re producing speech to journalism, you’ve got this 35 submission limit.
And the Constitution does not allow the government to regulate speech differently based on what is being said. And so that’s why we sued, to overturn that unequal treatment. There’s another problem with AB5 as well that’s mainly a problem for the photo journalists, but for the writers as well. In a sort of a peculiar bit of draftsmanship, AB5 ends up banning video recording for freelancers. So as a freelance photographer, you could be snapping pictures of an event and flip a button on your camera and start recording video, and the moment you do that, you lose the ability to freelance under AB5. And even writers are finding themselves writing content, and then part of that contract includes taking video or shooting pictures. And so, they were having their ability to freelance limited by the video ban as well. And again, only journalists were subject to this ban. And so, for the same reason that we challenged the 35 submission limit, we challenged that video ban as well.
Patrice:
Now, what is the status of this lawsuit?
Jim:
Yeah, so we filed the lawsuit even before AB5 went into effect. And at the end of the year, we filed the lawsuit. I’m sorry, at the end of 2019 we filed the lawsuit, and asked the court to put an immediate stop to this 35 submission limit. Because what we were seeing already, even before AB5 went into effect in January, we were seeing publications blacklisting California writers and photographers, because either they didn’t want to deal with having to count the number of submissions that were coming in and worrying about hitting the 35 submission limit, or they simply couldn’t manage that limit in a practical way. And so, they said it’s easier to just not deal with California freelancers than to try to deal with these complicated rules that California has put into place.
So even to the extent that publications looking for coverage on local California issues were already advertising, even before AB5 went into effect, that they would not consider anyone from California to cover California. They wanted someone from a neighboring state to cover California. So we sued and asked the court to put an immediate stop to this. And unfortunately the district court didn’t agree with our arguments. The district court did not understand the important constitutional violations that were taking place, and so denied our request for preliminary leave and actually dismissed the lawsuit for the same reason. And so, that lawsuit is now on appeal to the 9th Circuit Court of Appeals.
Patrice:
Gotcha. I mean, I think what you’ve highlighted here, and thank you for the thorough explanation and background, but what stands out to me is the unequal treatment of people within the same profession, but also the hardship that it imposes on individuals who are simply just trying to work on their schedule and in the manner they choose. And for our viewers and listeners out there, it’s amazing when you have box media hailing the passage of AB5 as this great worker protection law, and then they turned around and fired, laid off 300 freelance writers. And with the idea, they did hire on a few full time or full employees, but not nearly as many as freelance writers that they had contracted before that. And I think that leads to another question about what the intention or the motivation behind AB5 was? I mean, I think proponents will say, well, this is a great way to get people, workers to be hired by their employees as full W-2 employees with all of the benefits and all of the worker protection. Do you subscribe to that position, or what do you see as the motivation?
Jim:
Oh no, I think you’re exactly right, I think that is the motivation. In policymaking, it’s always Baptists and bootleggers. So I think there are some in the legislature who think, gosh, it would be really nice if everyone had a W-2 job, and isn’t that how everyone wants to work? The sponsor of the bill, Lorena Gonzalez, said that these freelance jobs are not quote real jobs. From their perspective, if you don’t come in, and punch the clock, and work nine to five and join the union, it’s not a real job. And I think that’s where some of the bootlegging comes in, the self-interested policymaking. The unions aren’t able to unionize freelance workers very effectively, sometimes not at all. And so you have this coalition of well-meaning folks thinking that if we legislate full employment, people will be employed.
And then you’ve got the self-interest folks on the other side thinking, gosh, that’ll be a great opportunity for us to add members to our roster, and you end up with this policy stew that doesn’t taste very good to anybody in AB5. But I think absolutely the motivation for AB5 was there’s one way to work, there’s one kind of job that is a real good job, and folks who have made their careers as freelancers, independent contractors are missing out on that better way of working. And the response from freelancers, from freelancers, mind you, across the political spectrum, was leave us alone. We do not want your help. It is not helpful. You are destroying our careers. And I think as convoluted as this bill that was passed on Monday is, it’s a response to that. It is the legislature understanding that they’ve really screwed something up badly and broadly, and they’re trying in a haphazard way to fix it, but still leaving many, many problems on the table.
Patrice:
Well, in picking up on your point, leaving many problems on the table, I mean, is exemptions kind of, I think you had a blog post out today, a great one, the fix it bill. Is that the way to fix a law that seems to be fundamentally broken, or should this really be about repealing AB5?
Jim:
Yeah, absolutely. In order to fix the problem, AB5 needs to be repealed. We can go on like this, and I imagine we will go on like this adding more and more exemptions and creating a more and more convoluted system. If you managed to sit through the floor session the other day when this bill was passed, you would have seen dozens of amendments being offered for tattoo artists, for TV journalists who are still not included in any of the exemptions, for franchisors and franchisees, for businesses that serve other businesses. There were dozens of exemptions that were offered as amendments that were rejected by the majority. And so, it’s not a speculation to say that next session we’re going to be back in the same position adding more exemptions AB5, because it’s a fundamentally bad policy to tell people you must work in one way as a full employee, and anything else isn’t good enough for you from our perspective, from the legislature’s perspective.
And whenever you do that, you end up in this situation where folks whose livelihoods are destroyed by these policies have only one choice, which is to ask for their livelihood to not be destroyed, and then so on and so forth down the line. There’s a little bit of background here that kind of helps to explain what’s going on here. All of this comes out of a California Supreme Court decision called Dynamex, about whether contractors were being appropriately classified as independent contractors. And that’s where this test comes from, that you can’t be an independent contractor if you’re working in the course of the hiring entities business. And the response to that decision from the legislature was, well, if we don’t enact exemptions to this new test that the courts put into place, then everyone’s going to have to be an employee. It’s the court’s fault that we have to enact this legislation.
That’s not true. That is the legislature advocating its responsibility to say, is this test the right one? Should we apply this test to everyone? Can we formulate a better test? The legislature didn’t ask any of those questions. It just took as a given, this test that was created by the California Supreme Court, and then decided to create all of these exemptions. And the reason they did that is what we talked about before. They said this idea that if you’re not a full employee, you’re not a real worker and you don’t have a real job. And in order to enact that policy preference, we ended up in this mess with AB5.
Patrice:
Jim, that is really great what you brought it back to, which is the Dynamex decision, the legislature abdicating its role, and really how it could have or should have addressed what may have been some examples of misclassification. I have not seen that those examples where anything widespread. Maybe the bill sponsors did. But I think the larger point is that those issues could have been dealt with in a different way, rather than such a sweeping law that had so many unexpected, unintended consequences. It’s taking food off of people’s tables, literally, in the midst of a pandemic. And so, I appreciate you really breaking down both the specific challenges for journalists and for content creators, but also broadly how we got to where we are, why we’re where we’re at, and probably what’s going to happen moving forward. Is there anything you want to leave us with about AB5 or the work that you’re doing?
Jim:
Well, unfortunately, the work continues on this, because even though the exemptions for journalists were broadened a little bit by the bill that was just passed, there’s still this fundamental constitutional problem of treating journalists different from other freelancers. And then we still have the fundamental problem of leaving many, many independent contractors out in the cold and without an exemption from this bill. And so, both the litigation and the lobbying are going to have to continue until we end up with a better policy solution where we recognize the dignity of individuals to choose their own type of work, choose their own way to organize their business. And AB5 just fundamentally doesn’t do that. And so until we get full repeal, we’ll still be fighting in the courts and fighting in the legislature for recognition of the dignity of freelance work.
Patrice:
Very good. And you know what? We are right there alongside with you, Jim. At the Independent Women’s Forum, actually we have a storytelling campaign called Chasing Work, where we have been interviewing independent contractors, men and women, from transcriptionists to HR professionals, people who have seen their livelihoods literally disappear because of this law. And that’s even before the pandemic hit and work became even more elusive. So, I think all of these efforts, the legal efforts, the legislative efforts, the storytelling efforts are important to raise awareness. And they’re big kudos to all of those freelance organizations that are getting the message out so that the legislature actually hears that this is bad policy and exemptions upon exemptions is not going to deal with a law that’s fundamentally flawed. So Jim, thank you so much for your time today for joining us on She Thinks.
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