The California Freelancer Law And What It’s Really About

My previous two blog posts discussed the new California Labor Law, referred to as AB-5, also being referred to as the “freelancer” bill. In this post I’ll try to wrap this up in a neat little package for you.

A lot of concern has been voiced concerning photographers losing their copyrights because of this law, which goes into affect on January 1st.

There is nothing in the law that specifically requires a photographer to transfer ownership of their photographs, or any other intellectual property for that matter, to some publisher. The copyright issue is a hot button topic, but that’s not what this new law is really about.

What’s it really about then?

The California law AB-5, is really about changing how employers deal with temporary help. Employers hire temp workers to fill voids in their workforce, usually on a short term basis, but not always. There are a lot of different terms used here to describe a “temp” worker such as “seasonal”, “contractual”, “interim”, “outsourcing”, “freelance”, etc…

The benefit to the employer is they can fill holes in their workforce using outside help without having to hire people on a permanent basis and that allows them to avoid having to pay insurance costs and provide employee benefits that they might otherwise be required to provide under law for regular full time and part time employees. The other benefit to the employer is that these “temp” workers are usually paid wages that are much lower. It also gives individuals who are not actively employed by a company or business access to jobs and income that would not otherwise be readily available to them, for a wide variety of reasons, as cheap labor.

I used to work for a major newspaper and from time to time I’ve hired temporary help via “temp agencies” to fill holes in my working staff, while I recruited suitable full or part-time people to fill job openings. But this isn’t always how the “temp” market works for everyone.

In the case of photographers and writers, many have no direct access to jobs in their field. For example, the internet has been credited with the demise of the newspaper. A writer or photographer who may have once had a job with a regular printed newspaper writing stories or taking photographs for the publication may now be out of the employment market because newspapers have been unable to make a profit and have laid off staff to save costs, or even more dramatically, shut down completely. Just take a look around your own home town and see how many local or even large newspapers have gone by the way-side, no longer printing their publication or no longer providing that product. Some have converted their publications to focus on the online internet publishing market. The demise of printed publications and the move to the internet product has created a lot of lost jobs and a large “temp” market of available skilled labor and has shifted the expense of maintaining a staff to the worker who now provides their own services as a contract worker (freelancer) at a much lower cost as well as their tools needed to do that labor.

For the purposes of this article I’m going to discuss a fictional web publication that focuses on the photographic industry and explain how this “gig economy” may work in that world.

I’ll call this fictional Internet publisher “Through The Lens”

Through The Lens started out on the internet as a small Internet site devoted to the world of photography. Sound familiar?

Through The Lens would publish camera and equipment reviews, write interesting articles on the world of photography and try to generate an Internet following. They lucked out. Their page hits continued to grow over the years and the readership increased as a result.

Their following became big enough that Through The Lens could now look for methods of generating revenue. The biggest generator of revenue of course is advertising. The publishing world has always relied upon advertising revenue to generate a profit. Newspapers today still rely on advertising to bring in the money, and the larger the audience for the publication, the more they can charge for that advertising. An advertisement run in a large print newspaper can bring in tens of thousands of dollars, depending the the size of the ad and the visual placement in the publication and how often that advertisement is printed or displayed. Selling advertising is what pays the bills, and that includes the costs of hiring and maintaining a work force to produce that publication.

Through The Lens is now a big internet publisher in the photography industry and their advertising comes from other businesses that want to sell photographic products and other related services. You’ll see this on just about every major Internet Website. Some advertising may be in the form of direct advertising from advertisers who pay a fixed rate for a placement in the publication, other forms may include “affiliate links” where a small ad is displayed and a reader can click on that ad and be taken to the retailer’s Website and any sales that result in that action provides a cut of the sales to the business that forwarded that sale. Through the Lens has a number of these links on their website and readers may from time to time click on those links and buy a product, the result of that action is they make a commission on the sale. It may not be a big commission though. It could only be a few dollars or even a few cents. Still, that’s money coming in to the referrer.

Through The Lens realizes, as all publishers eventually do, one way to generate more income is to increase readership, because, more readers equate to more clicks on affiliate links and more market exposure for their advertisers. One way to increase that readership is to increase the relevant content in the publication. They need more articles and relative information in their publication to attract more readers. What do they do? They could hire writers and technical people to generate that content in house or they hire independent contractors to create that content for them and those contractors are now given a cut of the pie when their article is published.

This brings us to one of the current economic models of the Internet.

Through The Lens discovers that there is a large surplus of available workers in their industry. In this case, there is an over-abundance of photographers, writers and other skilled workers who could be utilized to produce content for their Website. They make agreements with these workers to create content and once that content is published, the worker now gets a cut of the action. Often times that income comes in the form of being paid on the basis of the number of page hits their article or content receives. There is a scale for this payment. An article that receives 3,000 page hits may generate $15 of income, an article that receives 30,000 page hits may generate $150 or more for the content provider. The more their article gets read, the more they make.

Through The Lens have now created a staff of contract workers who can pump out content for their Website at a fraction of the cost of hiring actual employees to do that work for them in house.  Through The Lens now makes more money and contract workers looking for income that would not normally be available, now have a way of generating income. One of the problems though, is that these workers end up working for next to nothing. Maybe the equivalent of 25 cents and hour, maybe more. It’s based on the time and expense of creating content vs the amount of income received from that created content. These workers get no additional benefit of their work such as unemployment insurance, health care, reimbursement for their business expenses and so on. It effectively becomes an employment situation not unlike the old garment industries of the 1800’s where people work piecemeal producing garments for pennies in what was referred to as sweatshops.

The issue here is when does it become exploitative?  The contract workers, in our case, freelance photographers and writers, put a lot of time and effort into creating content. They submit that content and hope it’s literally a hit (page hit), as the more page hits they get, the more they make. But, it is low paying. Many of these content providers end up spending a great deal of time and effort, at their own expense, generating content for these Websites, and in return they are making a substandard wage as a result. One way they increase their income is to submit more articles to the publication. They’ll make more money if they have more people reading their articles, so creating more articles is the result. For a typical photographer or writer who does this, it could increase their income from $30 a week to maybe $300 a week or even more if they are really talented and find their niche. To produce that content, they’ll spend a lot more time and money too. But on the other hand, nobody is being forced to do this type of work. It’s the choice of the freelancer to work a lot for very little income, if they so desire. At least to a point, because historically, the lawmakers will try to put a halt to anything that spins out of control. They always have.

The California “freelancers” law, AB-5, seeks to draw a line as to when the content provider ceases becoming a contract “temp” worker and now becomes classified as regular “full time” or “part time” employee and part of that line is defined by how many articles they are submitting to a particular publication each year. A lot of these freelancers are putting in an extraordinary amount of effort and spending their own money to make pennies in return. It’s become an exploitative employment market in a lot of cases and California lawmakers have decided that more market regulation is the solution.

The issues at stake with the challenges to this law are the limits placed on the number of submissions that a photographer or writer can make to a publication each year before they become legally reclassified as an employee rather than an independent contractor.

Once the freelancer reaches a statutory defined threshold, they become legally classified as an employee of who they are working for by the state and a whole new set of laws and regulations take effect. It’s no longer contract employment as they are now treated as regular employees for purposes of labor law and the state has the right to regulate labor practices in their jurisdiction. After all, lawmakers are really working on behalf of the general public and the general public has required them to regulate the industry to prevent unfair and exploitative conditions from occurring. Laws are just the will of the people.

One of the side effects of this situation for photographers and writers is that once classified as an employee, any intellectual content they create and submit the Website or “employer” now, by law, becomes the property of the employer as that content was created for them by an employee, not an independent contractor.

The end result of course is that by regulating the industry, the state is stepping in to regulate free commerce in order to prevent unfair and or exploitative business practices in industry. All new regulations have side-effects, some intended, some not, some good, some not so good.

The argument against this regulation boils down to the concept that everyone should have the right to work for substandard wages and that a business should be allowed to operate according to their economic needs without government interference. It’s an age-old argument and has been addressed in state and federal courts again and again since this country was founded.

It all comes down to supply and demand. Demand drives supply, not vice-versa. If the supply of workers remains constant and the demand for those workers decreases, the wages of those workers will go down. There is no longer a large demand for photographers and writers who used to make $75,000 a year generating content, but there is a demand for photographers and writers who will work for 25 cents per hour.

In the end, the Internet Websites who provide work for contractors at very low wages will be regulated out of the business or go out of business because of under-demand of their services. We are already seeing this happen, as Website publishers who use these practices are being subjected to more legal and economic pressure to change their business model.

What this ultimately means for freelance photographers and writers is that the free market and it’s associated regulations will require many of them to find an alternative profession as there are simply far more photographers and writers than the market really needs.