Written by Sharon Shaoulian
California’s music industry finally came to an agreement with lawmakers on pending amendments to California’s Assembly Bill 5 (AB5). The amendments would provide relief to professionals in the music industry, including recording artists, musicians, composers, songwriters and vocalists, amending the prior language in AB5 that created hurdles for self-employed music professionals to obtain work.
To provide some background, Governor Gavin Newsom signed AB5 into law in September 2019. The new law expanded the California Supreme Court’s decision in Dynamex Operations West, Inc. v. Superior Court. Specifically, it applied Dynamex’s ABC Test to both California Wage Orders and the California Labor Code, creating the presumption that workers in California are employees, not independent contractors – unless an employer can satisfy a three pronged test “ABC test.”
- That the worker and his performance of the work are free from the control and direction of the hiring entity, either by contract or in fact;
- That the worker performs work outside the usual course of the hiring entity’s business; and
- That the worker is customarily engaged in an independently established trade, occupation or business of the same nature as that of the work performed.
The legislature authorized exemptions from the ABC test for specified industries; yet many in the music industry do not fall into any of the exemptions.
Further, although AB5 was initially designed to protect the rights of workers, as changing their status from independent contractors to employees would afford them benefits they otherwise would not have, the law actually adversely affected many self-employed workers, like musicians.
For example, instead of a musical venue paying musicians and artists by 1099, under AB5 many performers are deemed employees with pay by W2 and benefits like Social Security, disability, workers’ compensation, and unemployment insurance. Moreover, artists now have to pay their own backup artists and session musicians as employees and provide the same benefits. Dissatisfaction with this arrangement spread, making it difficult for many in the music industry to obtain work. The music industry began lobbying the state legislature for an exemption to AB5 as other industries have done.
The lobbying effort was successful. The new pending amendments will provide exemptions for singers, songwriters, composers, recording artists and other music workers, and states that musicians will again only need to meet the less burdensome Borello test, applied by California courts prior to AB5, in order to determine if an individual is an employer or an independent contractor. Under this test, the primary test of an employment relationship is whether the person for whom services are rendered has “the right to control the manner and means of accomplishing the result desired.” This test would allow most music professionals to operate as independent contractors once more.
Of course, if a musician’s work involves substantial control from its hiring entity, such a musician will continue to receive benefits under AB5. The pending amendments will be considered by the Legislature when it reconvenes. If passed, this change will go into effect on January 1, 2021.