Agreement to Amend CA's AB5 Helps Music Industry

AB5 has been highly controversial for several reasons and received widespread criticism from both employers and contractors — primarily within the "gig" economy. Various gig companies collectively launched a campaign to add a referendum to California's 2020 ballots to exempt them from AB5. A myriad of businesses announced the certainty of downsizing if AB5 forced the reclassification of its workforce. In the media space in particular, freelance journalists and photographers worried that companies would terminate their contracts before they reached AB5's cap on work contributed to a single publisher. The American Society of Journalists and Authors, the National Press Photographers Association, the California Trucking Association, Uber and Postmates each filed lawsuits against the state of California with claims that AB5 is unconstitutional.

As a result, California state senators and assembly members introduced bills and a California constitutional amendment to repeal AB5, as well as other bills designed to add additional exemptions for journalists, newspaper carriers, interpreters and translators, and small businesses. In 2020, Assemblywoman Lorena Gonzalez began introducing amendments to create additional exceptions to AB5 to address some of these concerns, which undoubtedly would have an adverse impact on California's gig economy.

The music industry, in particular, has been an outspoken critic of AB5's almost certain repercussions. Independent musicians often rely on short-term "spec" agreements that classify session musicians, roadies, sound engineers, etc. as independent contractors. The Los Angeles music community expressed fears that AB5 would force artists and musicians out of Los Angeles to other industry hubs such as Nashville and New York. Others worried that independent musicians would stop collaborating with session musicians, songwriters and producers who may be classified as employees.

The new amendments to AB5 should assuage some of those concerns by reverting to the Borello test for most music professionals who had been subject to the stricter ABC test under AB5. Stakeholders — including the Recording Industry Association of America, American Association of Independent Music, Music Artists Coalition, International Music Professional United, Songwriters of North America, American Federation of Musicians, Recording Academy, International Alliance of Theatrical Stage Employees, Screen Actors Guild (SAG-AFTRA) and the Teamsters union — agreed on amendments to the Bill. Assemblywoman Gonzalez and Majority Leader Ian Calderon announced that the amendments would allow for musicians, vocalists and other recording artists — as well as composers, songwriters, lyricists, musical engineers, sound mixers, record producers and others involved in the creation, marketing, promotion and distribution of sound recordings and musical compositions — to collaborate and contract with each other without the ABC test applying to their relationships.

For standalone live performances, the ABC test will only apply to headliners at concert venues with more than 1,500 seats and performers at large festivals with more than 18,000 attendees per day. For companies with longer-term relationships with live performers, the ABC test will remain applicable in instances where the nature of a musician's work inherently draws significant control and direction from their employer (e.g., musicians regularly performing in theme parks, symphony orchestras and musical theatre productions).

For now, musicians can be grateful that California officials have accommodated their concerns and sought to return to an economic environment that allows musicians to collaborate on their terms.

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Sidney S. Fohrman is a partner and Ariel D. Shpigel is an associate based in Sheppard, Mullin, Richter & Hampton's Century City, CA, office.