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I’m fighting back against laws that could shut down my freelance business

Freelancing has allowed me the flexibility to support my family for the past 17+ years. But these new laws would threaten my livelihood.

I’m fighting back against laws that could shut down my freelance business
[Photos: skyNext/iStock; Maksim Shchur/iStock]
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For more than 17 years, I’ve been a freelance writer and editor. I launched my business shortly after my daughter was born, and I’ve worked with a number of publications, including Fast Company, where I’ve written regularly for more than six years. Working as a freelancer has given me the ability to earn a good living and still attend soccer games, school performances, and track meets.

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It got me through more than a year of grueling surgeries, chemotherapy, radiation treatments, and Herceptin infusions after I was diagnosed with aggressive, early-stage breast cancer. I could work when I wanted to and still support my family, scaling down when I needed to. More recently, it allowed me to care for my mother, who died of esophageal cancer in 2018, and spend time with my father, who has early-stage dementia. I also make more money than I would at a full-time job and don’t have to commute two hours each way to Manhattan and back.

But two bills that were introduced into the New Jersey legislature in November 2019, NJ Senate bill S4204 and NJ Assembly bill A5936, threaten to decimate the freelance business I’ve built.

This legislation essentially classifies every worker as an employee unless they can pass a very narrow set of criteria. While their goal is to prevent companies from misclassifying workers, they are poorly written and will prohibit many successful, independent contractors from being able to earn a living the way they choose. In response, I’ve helped create a Facebook group of more than 900 freelancers, independent contractors, and business owners who are fighting for our livelihoods and trying to explain to our legislators why they need to fix these bills instead of fast-tracking them through a lame-duck legislative session.

This isn’t just a New Jersey issue. Employee misclassification is getting widespread attention. California passed a similar law—AB5—earlier this year. In New York, a proposed Senate bill would enact similar requirements if passed.

On a national level, Democratic candidates Elizabeth Warren and Bernie Sanders each endorsed AB5, despite the fallout it’s causing, and Warren’s website includes plans to push for a similar federal law that will make worker misclassification a violation of labor law in addition to a tax issue.

Actions with unintended consequences

On the surface, the goal of these initiatives is admirable: to protect workers from exploitation and ensure that employers don’t cheat them out of benefits such as unemployment insurance, disability compensation, workers’ compensation coverage, health insurance, and paid vacation. As someone who writes regularly about bias, fairness, and equality, I spend no small amount of time thinking about inequity in all its forms.

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And employee misclassification is a problem, although various sources differ on how widespread it actually is. A 2015 report by the Economic Policy Institute estimated that between 10 and 20% of businesses misclassify at least one employee in the U.S. If an employer is shirking its duty to its workers, it should be held accountable.

Laws such as AB5, as well as the New Jersey bills and the proposed New York legislation, each classify workers as employees unless they pass a narrow “ABC” test. In New Jersey, the test essentially states that:

  1. Independent contractors perform their work on their own and without supervision of the hiring entity.
  2. Independent contractors perform services that are outside the ordinary course of business OR work is performed entirely off-premises of the hiring entity.
  3. Independent contractors are routinely engaged in the services they are performing.

If you meet all of these criteria, you may be free to keep operating as an independent contractor. If not, you’re considered an employee.

The problem is that the language in each is so murky and sweeping that it leaves too much room for interpretation. And that interpretation affects people who work as I do. Under the California law, even those who operate as business entities such as S-corporations or limited liability companies (LLCs) enjoy no protection from reclassification, and no language in the New Jersey bills protects them either. So, in the case of S4204 and A5936, the letter of the law could create a slew of ridiculous scenarios, such as:

  • A freelance photographer who spends a half-day on-site at a media company taking executive headshots could be out of compliance.
  • A lighting designer who subcontracts for an interior design firm and does installations at the client’s place of business could be out of compliance.
  • A mason who periodically works for a general contractor on construction sites could be considered an employee.

And even if independent contractors pass the ABC test, the companies that hire them might not want to take the chance. Even though California’s law doesn’t go into effect until January 1, 2020, companies are choosing not to work with California freelancers. Some are being cut loose by clients who don’t want to deal with the regulatory risk. For example, Rev.com stopped hiring transcribers in California, New Jersey, and Massachusetts because of regulations. On December 16, Vox announced it was laying off hundreds of freelancers who contributed to SB Nation. Although the post from SB Nation executive director John Ness invited contractors to apply for employment with the company, CNBC reported that the company would be posting roughly 20 full- and part-time positions.

Caught in the crossfire

At any given time, I may have more than a dozen clients. Some, like Fast Company, hire me regularly, while some need me just once or a few times per year. Imagine if 12 companies had to put me on their employment rosters. I might not lose the regular clients, but I would likely lose those few-timers, which make up a significant portion of my business. No one is going to go through the hassle of deducting withholding and paying workers’ compensation insurance on me for three projects per year.

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But let’s say that seven of them decide to hire me as an employee. If one company stops working with me for a year, would I be able to claim unemployment benefits? Likely not, as I would have other sources of income. Let’s say I develop a repetitive strain injury from all the typing I do. Which workers’ compensation policy would cover me? Money would be deducted from my paychecks and paid into systems I can’t use.

If I worked only for companies as an employee rather than a contractor, I would no longer be able to contribute to my SEP IRA because I wouldn’t be self-employed. However, I likely wouldn’t be working enough for any publication to qualify to contribute to their retirement plans. My only option for saving for the future would be a traditional or Roth IRA with a contribution threshold of just $6,500—a fraction of the SEP’s threshold.

For many creatives like me, there is another big issue: ownership of work. A writer can sell the rights to print a story one time or charge more to sell all rights to the story. If someone wants to make a movie or write a book based on one of my stories and I own the rights, I get more money. Reprint? Again, if I own the rights, I get more money. (Freelancers may choose to sell different rights to different clients. But the point is that we choose. If we don’t like the deal, we don’t have to take it.) If I do the work as an employee, the employer owns the rights to my work. This applies to photographers, illustrators, coders, graphic designers, and virtually anyone who creates work that can be protected by copyright.

Making bad laws worse

Proponents of the bills say that they’re simply giving authorities the tools they need to go after bad actors who exploit workers—as well they should. But, in mid-November, New Jersey fined Uber $649 million for misclassifying workers without any additional legislative help.

Some Senate and Assembly aides with whom I’ve spoken about the bill pooh-pooh our concerns. They say that we won’t be affected—they’re not targeting us. They say that they’re simply “codifying” existing employment law. But analysis by the law firm Fox Rothschild based on the initial version of the Senate bill states that the language actually “tightens up [an] already strangling A-B-C test” for contractors.

In addition, the report expresses concern that the ultimate determination of who is an employee rests with the Department of Labor Commissioner, regardless of whether the worker passes the test. Since then, the language has been changed to be slightly less restrictive, but testimony from the New Jersey Civil Justice Institute, New Jersey State Bar Association, New Jersey Chamber of Commerce, and New Jersey Business and Industry Association, just to name a few, details concerns that remain.

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Despite a standing-room-only crowd and more than four hours of testimony overwhelmingly opposing the Senate bill, the NJ Senate Labor Committee, in a 3-to-1 vote, approved the bill, even though committee members admitted it was “confusing” and needed changes. Next, it goes to a vote in front of the full Senate, but it’s currently unclear when that will happen. The Assembly bill is currently in the Appropriations committee but not scheduled for a vote.

The Senate president’s office has assured several of my colleagues and me that we don’t need to worry. However, despite their assurances that “freelance journalists” won’t be affected, that’s not what the words on the page say. And this law affects every sector—not just writers and other creatives. In 2018, the owner of one New Jersey disc jockey business was reportedly fined $22,000 for misclassifying 10 freelance DJs who worked for his business, even though they had their own equipment, ran their own freelance businesses, had other clients, and wanted to remain independent contractors. This is exactly what the businesses hiring freelancers and independent contractors fear will happen to them.

Also, such assurances ring hollow when a number of groups have been granted carve-outs in the legislation, making them exempt. These include realtors, accountants, multilevel marketing salespeople, commission-based insurance salespeople, and travel agents, among others. Shouldn’t the laws apply equally to everyone? Not to mention that, if the laws are so murky and unclear that so many clarifications and carve-outs are necessary, why not use this legislative opportunity to make the legal framework better so it works for all businesses?

Yesterday, the American Society of Journalists and Authors took action, filing suit in federal court against AB5, “to stop a new law from violating the Constitution and devastating the careers of freelance journalists such as writers and photographers,” according to a release. The organization is joined in the suit by the National Press Photographers Association. Yet New Jersey’s leaders vow to carry on with its versions, despite the controversy and opposition.

I’ve worked as a freelance writer and editor for the better part of two decades. My career has allowed me the flexibility I needed to raise my daughter, recover from cancer, and care for my aging parents while doing fascinating work and earning more than I could in a full-time job offering much less freedom. Now, these poorly written bills threaten to put me—and many others—out of business. But not without a fight.

About the author

Gwen Moran writes about business, money and assorted other topics for leading publications and websites. She was named a Small Business Influencer Awards Top 100 Champion in 2015, 2014, and 2012 and is the co-author of The Complete Idiot's Guide to Business Plans (Alpha, 2010), and several other books

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