California’s much debated and derided new AB5 or “Gig Worker” law takes effect January 1, 2020. Largely a response to the “gig economy” and app-based ride share companies, the law aims to protect independent contractors (such as Uber drivers) by forcing companies to hire them as employees rather than letting them work on a freelance basis, receiving 1099’s. But what does it mean for the presentation professionals and employers?
The old 11-point Borello test for whether someone is an employee or a contractor remains in effect for all California workers. No single part of this test is determinative, but overall the questions (such as “whether the person is engaged in an occupation or business that is distinct from that of the company”), point to whether the person needs to be put on salary or not.
The new law takes things further, making it even harder to be classified as an independent contractor, but it does provide a carve out for certain “Professional Services” including Graphic Designers. This carve out, however, comes with 6 more factors that a graphic designer must meet:
- Maintain a business location separate from the hiring firm which can include their residence
- Have a business license
- Be able to set or negotiate their own rates
- Be able to set their own hours
- (a) Be customarily engaged in the same type of work under contract with another hiring firm, or (b) hold themselves out to other potential customers as available to perform the same type of work
- Exercise discretion and independent judgment performing their services
Assuming a California Presentionist considers themself a graphic designer (and you probably want to for these purposes), employers should be able to continue hiring that person on a freelance basis. But the onus is on the employer, and many employers—scared of potential legal consequences and costs involved in audits—may simply make the business decision to stop working with California freelancers.
The good news in the law is that it does not apply to freelancers who are not California residents and companies outside of California. The bad news is that California also has begun attempting to tax non-resident workers and companies when they do work for California entities.
Doing business under an LLC as a sole proprietor does not avoid getting caught up in this, but if you are a freelance Presentationist, my advice becomes even stronger in advising you to:
- Obtain a Tax ID# rather than use your SSN# (it’s free and much safer!)
- Set up an LLC (it’s easier than an S-Corp, can be set up by most CPAs or lawyers or even through LegalZoom)
- Get a business checking account and credit card for expenses
- Register and pay any local and state business licenses
