20 Sep Illustrators Benefit from Bill Rectifying CA Labor Law
In January of this year, we reported on AB5, a landmark bill enacted in California that governs the relationship between businesses and contract workers. The intention behind AB5 was to reclassify exploited gig workers as employees, entitling them to benefits such as a minimum wage, overtime pay, unemployment insurance, and health benefits. However, the law proved to be detrimental to many creative professionals. On September 1st, Governor Gavin Newsom signed into law AB2257. The law clarifies provisions of AB5 and provides additional exemptions for freelancers such as illustrators.
To address the exploitation of gig workers, AB5 codified the ABC test; a three-pronged test devised to prevent the misclassification of contract workers. If all three criteria of the ABC test were not satisfied, a worker would be considered to be an employee, even if the worker and the hiring company had a written agreement establishing their professional relationship. A few industries were exempted from the ABC test, including graphic designers and fine artists. However, news cartoonists (along with journalists and news photographers) were limited to only 35 submissions for any one client in a calendar year. The law caused a great deal of confusion about the status of professional contract workers, deterring companies from hiring professional freelancers.
Industry groups and professional associations such as NPPA raised concerns with the new law. In particular, the groups took issue with the exemption of some industries and not others, and with the arbitrariness of the limit of 35 project submissions. Several stand-alone bills addressing those issues were introduced into the California legislature. Many of those bills were folded into AB2257, which modified and expanded the list of professions exempted from the ABC test. Since the bill was passed as an urgency statute, it went to effect as soon as Governor Newsom signed it.
Exemption for Illustrators and Cartographers
Graphic designers and fine artists were already exempted from the ABC test in AB5. However, illustrators were not expressly mentioned. As we mentioned above, news cartoonists were limited to 35 submissions in a calendar year.
AB2257 addresses these issues, as the bill removes the 35-submission limit for news cartoonists (as well as journalists and news photographers) entirely. It also adds illustrators and cartographers to the list of exempt occupations, subject to certain conditions:
- The individual must work under a written contract that specifies the rate of pay, intellectual property rights, and obligation to pay by a defined time.
- The individual cannot be replacing an employee who produced the same work for the hiring entity.
- The individual doesn’t perform the work primarily at the hiring entity’s business location.\
- The individual is not prevented from working for more than one hiring entity.
Follow Best Practices: Do the Paperwork
AB2257 brings home the importance of spelling out the working relationship with a client via a contract. At a minimum, a contract should identify the parties (the artist and the client), clarify the obligations (the deliverables and fee), payment schedule, and intellectual property rights ownership/transfer. (See the Graphic Artists Guild Handbook: Pricing & Ethical Guidelines for an extensive discussion on contracts.)
To meet the requirements of AB2257, it isn’t necessary to have a contract for every project completed for an ongoing client. However, a contract should be used to establish the relationship at the outset. It’s also advisable to retain supporting communications such as emails and invoices. You can also confirm that your business is a bona fide professional service by setting up an LLC or incorporating it. Forming an LLC in California costs $70 and requires a tax state obligation, which isn’t substantial (for example, $800 on $250,000 in income).
These best practices should be followed by all graphic artists, and not just California residents. California’s struggles with AB5 and AB2257 are being followed by state legislatures interested in enacting their own labor laws. Bills similar to AB5 have been considered in New York, New Jersey, Massachusetts, Washington, and Illinois, and the PRO Act passed the House before stalling in the Senate. While none of these bills may be signed into law, states are clearly interested in finding a legislative solution to the problem of worker misclassification.