Agreement to Amend CA's AB5 Helps Music Industry

AB5, which added §2750.3 to the California Labor Code, codified Dynamex Operations West Inc. v. Superior Court, 4 Cal. 5th 903 (2018), a California Supreme Court case which used the "ABC test" to classify an individual as an employee or independent contractor. While the previous S.G. Borello & Sons Inc. v. Department of Industrial Relations, 48 Cal. 3d 341 (1989), test used in California placed the burden of proof on the employee to prove misclassification using a variety of flexible, discretionary factors, the ABC test shifted the burden of proof to the employer and created a presumption of employee status.

The ABC test, as outlined in AB5, requires an employer to establish three different factors to prove that an employee is an independent contractor:

1. The worker is free from the control and direction of the employer in the performance of his or her work;
2. The worker's work is outside the usual course of the employer's business; and
3. The worker is customarily engaged in an independently established trade, occupation or a business of the same nature as that involved in the work performed.

AB5 carves out exceptions when the less stringent Borello test should be applied. AB5 exempts some occupations that provide "professional services" (e.g., attorneys, architects and fine artists). It allows freelance photographers and journalists to act as independent contractors as long as they contribute fewer than 35 pieces per year to a publication. AB5 also contains a provision establishing an exception for business-to-business contracts. Since AB5's codification, lawyers have debated some of the ambiguities inherent in these provisions, such as how to define a "fine artist" and whether AB5 will affect the use of loan-outs.