In the Bay Area, it seems everyone is complaining about the price of something – like a $6 bagel. What I think people forget is that prices reflect more than just products – they also reflect how the people behind the products are treated.
I’ve spent the last few weeks in deep conversation with filmmakers about California’s new ‘Gig Economy Law’ also known as AB-5. The overwhelming response has been one of panic about how much it will cost us as filmmakers. I have a different point of view.
First, some context. Most freelancers in documentary and industrial video production have become used to being paid as independent contractors.
I first noticed this trend over 20 years ago, while working as a grip and electrician in Los Angeles. Most jobs paid me the ‘normal’ way with a W4 form and a paycheck. Taxes were taken out and I usually got overtime on the shoots where we went past 8 hours a day or 40 hours a week. But some companies, especially the smaller ones would make me an offer, “You can get paid more if you fill out a 1099 instead.” They explained that, “No taxes would get taken out of your check, isn’t that great?” Of course they didn’t explain that I would be responsible for those taxes at the end of the year – often at a higher rate.
This wasn’t a huge deal for several years because I was working both W4 (payroll) and 1099 (contractor) jobs. So I claimed less and less exemptions on my W4 and the extra taxes there covered the tax debt on my 1099s. But then something strange happened, I got a job teaching storytelling for a non-profit and they asked me to be an independent contractor too. They said they couldn’t afford to hire me as an employee. I knew what they were doing was probably on the edges of the law, but by that point I’d figured out how to balance my tax debt with business purchases.
That year, in addition to teaching I was doing more camerawork and some editing. So, computer for work = deduction. Camera for work = deduction. Health care that I was paying for, out of pocket = deduction. Work meeting meals = deduction. My accountant recommended I set up a home office = more deductions.
Turns out I wasn’t the only one getting this tax advice. And I wasn’t the only one being paid as a contractor when I probably should have been paid as an employee. (As many as 57 million American workers are freelancers – that’s one in THREE adults who are currently working or looking for work.) And because I was scrambling to make ends meet during the recession, I didn’t think about the long term consequences.
I believe in doing your own research, so I read AB-5 last week. It’s not short but it’s not long. Has some legal speak but not too complicated to understand. Two sentences in the first section really struck me – and I’ve seen no news articles mention them. Take a look at the quotes below.
SECTION 1.
The Legislature finds and declares all of the following:
…(c) The misclassification of workers as independent contractors has been a significant factor in the erosion of the middle class and the rise in income inequality.…(e) It is also the intent of the Legislature in enacting this act to ensure workers who are currently exploited by being misclassified as independent contractors instead of recognized as employees have the basic rights and protections they deserve under the law, including a minimum wage, workers’ compensation if they are injured on the job, unemployment insurance, paid sick leave, and paid family leave…this act restores these important protections to potentially several million workers who have been denied these basic workplace rights that all employees are entitled to under the law.
Which begs the question: why would being a freelancer cost workers money? Why would it be a significant factor in the erosion of the middle class? Didn’t I get told that I’d take home a larger check?
After really looking at the law and talking to freelancers, what I’m realizing is that many people didn’t know that they had a right to the basic rights and protections of being an employee. So, for example, even if you’re an on-call employee, you’re usually entitled to sick days. You earn them, by law, by working.
Also, independent contractors are taxed at a much higher rate than employees are. There have been years where I paid an “Alternative Minimum Tax” of 30% and more to make up for the fact that the person paying me didn’t take out tax from my check.
But most of all, I think that AB5 will protect women and people of color who work in my industry. In California, employers have to pay men and women equal pay for equal work. This is much harder to track and enforce with non-employees. Proving racism in contracting is much harder than it is in employment. Employees have protections for hostile work environments that contractors don’t. Employees get paternity/maternity leave and sick days and workman’s compensation insurance. Contractors have to cover these costs themselves, out of their own savings or out of pocket.
Most freelancers I’ve spoken to are scared that they ‘can’t afford’ AB5, because they’ll have to payroll their subcontractors too. So when a video director hires a cameraperson, they will have to pay a salary plus 10-20% in payroll taxes. They’re petrified that they can’t get budgets to absorb that cost.
I think it’s up to all of us to insist that clients, producers, and funders make this investment in California movie makers at all levels. Many broadcast and theatrical projects already made this investment long ago. They hire union workers who make a living wage and often receive healthcare and a pension on top of that.
AB-5 has added to my workload these last few weeks. Research, additional costs, numerous conversations with accountants, HR professionals, lawyers, and Together Pictures crew. But I really do believe that this revolutionary change in the definition of a California employee is better for all of us in the long run.
I made my peace with the $6 bagel long ago – because I knew that price included a living wage and (in San Francisco) health insurance for the bagel making staff. So when other people complain, I just shrug and say “I’m thankful to have enough to pay for a $6 bagel. That wasn’t always the case.”
This was a really great breakdown of AB5.