Understanding AB 2257, Follow Up Legislation to AB 5, and Its Impact on the Arts Sector

 By Patricia Frischer

Conversations about AB5 put on by Californians for the Arts  was held on Oct 7 and these notes are my attempt to report on that zoom meeting. Before I begin, here is a brief summary of the issues, many of which were referenced during the discussion. As we all know now, this has huge implications for the arts industry. Many of us have had to change our business plans and many of us were not compliant without even knowing we were not obeying the letter of the law.

The “ABC” test adopted by the California Supreme Court in Dynamex Operations West, Inc. v. Superior Court is for determining whether workers in California should be classified as employees or as independent contractors. A worker can only be classified as an independent contractor if:

A.     the worker is free from control and direction in the performance of services; and

B.     the worker is performing work outside the usual course of the business of the hiring company; and

C.     the worker is customarily engaged in an independently established trade, occupation, or business.

This definition of an independent contractor is much narrower than that of the multi-factor Borello test—the standard previously used in California, which made it far easier to classify workers as independent contractors. AB5 makes the ABC Test the law in California, but it also expands its application beyond wage-order claims to all provisions under the state Labor and Unemployment Insurance codes.

AB 2257 signed by Governor Newsom on September 1, 2020 is effective immediately and includes additional exemptions and clarifications to AB 5 for arts sector from the Dynamex decision. These definitions include this one for Fine Artists: “For the purposes of this subparagraph, “fine artist” means an individual who creates works of art to be appreciated primarily or solely for their imaginative, aesthetic, or intellectual content, including drawings, paintings, sculptures, mosaics, works of calligraphy, works of graphic art, crafts, or mixed media.” You will also find info about musicians in many circumstances, performing artists for single engagements, specialized performers teaching master classes, modification to business to business exemption, and clarification to the relationship of individuals acting as sole proprietors.

Comments were made throughout the 75-minute zoom discussion by the participants.

Julie Baker Executive Director, California Arts Advocates/Californians for the Arts was the moderator of this meeting and has been very involved with the new bill.

The arts currently face a triple problem: AB5, the pandemic and systemically underfunded in California. She noted that our priorities are safe re-opening and being second responders who are rebuilding a life worth living. She commented that being able to see the people on this panel helps to humanize this whole process of working our way through these laws. The arts appreciate the support to get more funding so that we can survive the triple threat to the health of the arts.  

Assemblywomen Lorena Gonzalez, 80th District, Author AB 5 and AB 2257;

Her staff really care and they are progressive and want to do their best. They want to protect workers rights to have fair pay and insurance.  But there are tough decisions for those who want to remain independent contractors. People have not been complying to the law in the past and that is hard to face now and complicates the dialogue. If you can’t pass Borello then you have no case for being an independent contractor instead of employee. However, an individual who is a Sole Proprietor who uses 1099 to file and can be exempt. Also exempt is the workshop presenter with a special master class, or a judge for a competition. An instructor who rents a space in a facility is not employee unless the space controls what is being taught.

We can look at the Business to business and Sole Proprietors exemptions first to see if can be applied. If you have your own business you can be an independent contractor. But if neither of these apply, you can look into your specific skill for examples to help you figure out what applies to you. For example, Motion picture independent video makers could be a hard category to figure out. If you have a good case, gather similar colleagues together to fight to be independent if you are not. Also, they know that groups come together and no one is in charge and they all want to contribute and share profits or Intimate Theater shows are tricky. But if you own your own work and are performing it, you are exempt. That includes clowns, mimes, magician anyone that can pass Borello.

Working with unions and getting paid sick leaves and insurance could be a bonus that comes out of these discussions.  Now could be a good time to restructure and ask for money from the state to get the arts back to work. For example, we need a payroll system for small groups to use and help them bring down the cost of their businesses.  Can the government supplement the creation of that payroll system? We should ask Governor to put some money in place for the arts?

There will be a webinar in the next few weeks to talk us through the entire bill and how to figure it out. They will try to make check lists to help, but they realize it is overwhelming. Many groups have not yet been considered and could be included in future definitions.

She is often asked about 1099s. If you are getting the 1099, you are not breaking the law. If you are issuing the 1199, then make sure you have control and direction over the person.

You can review the specific details of each section of the bill on a fact sheet by Assemblywoman Gonzalez.

Majority Leader Ian Calderon, 57th District, Principal Co-author AB 2257

Arts Funding and Arts Education were his priorities as well as social safety nets programs. As co-author of this bill, they will continue to look at the exceptions that can be made for the arts.  There are lots of compromises and lots of diverse opinions in this bill. But whenever they were able to humanize the problems and cases, they were able to make progress. The Arts as a priority was raised from dead last to the #5 spot at the top of the second column. We went from $1 million to $26 million in funding in the last years. We have 40 million people in California so this is still less than a $1 per person. We should not be 20th in rank of funding the arts. But care has to be taken as everything is about precedent, so making the bill less complicated is important. These laws will affect the future. They can’t make changes unless they know what the problems are. This will continue to be developed for years ahead.  

John Acosta President, AFM Local 47

Music Exemptions: AB 5 there is a difference between amateur and professionals. If you are professional musician, you are an employee. If you are a community-based org with no compensation to your artists, they are not employees.  There is a single engagement rule that you are still an employee if you are being directed to do a specific job. He warned that California is a magnet for talent, but as we are shut down, we start to see the cracks. This talent will move into other fields unless we can rebuild ASAP.

Sara B. Boyns, employment Attorney, Fenton & Keller.

Dynamex, then AB 5 and then Borello has made this area so confusing.   She has devises check list to see how the business model is designed. Sometimes they have to redesign their business model. This new situation is most challenging for small non-profits.  For example, the orgs that send art teachers into schools.  The non-profits are paying them, not the school district but they are employees and the small non-profits cannot cover their sick days or health insurance. She suggests using California Lawyers for the Art for advice. And remember that more than one exemption might apply. If the teacher is a registers sole proprietor with their own business, they can be independent contractors.

Understanding AB 2257: A Toolkit to Understanding the Follow Up Legislation to AB 5