January 1, 2020, a new California employment law, Assembly Bill 5 (AB-5), will go into effect and derail the music industry as we know it. Take-home paychecks will be slashed, tax procedures will be flipped, and business as usual will be no more.  CMG Music Recording is dedicated to learning about this new law, providing resources for our community about the industry disruption at hand, and offering solutions to fight it together. We need to band together to educate each other as well as learn how to possibly fight it and/or get an exemption on next year’s ballot for freelance musicians. 

How Did This Happen?

The “gig economy” has become infamous in recent years due to some disgruntled Uber and Lyft employees and lawmakers who want better employment protections and benefits.   This bill was introduced by California Assemblywoman Lorena Gonzalez and signed into law by Governor Gavin Newsom in September 2019. AB-5 will force numerous industries to reclassify their workers as employees, rather than independent contractors based on the ABC test.   Many professions who thrive on the independent contractor business model-such as graphic designers, medical professionals, attorneys, real estate agents, insurance agents, commercial fishermen, attorneys, hairstylists, etc.-did not want this law to impact their profession and won an exemption from this law. Even Uber and Lyft drivers applied for an exemption, seeing that AB-5 is a misguided solution.  Musicians tried to do the same. Jordan Bromley, a board member of Music Artists Coalition (MAC) and a music business attorney based in Los Angeles, stated  “after much work, a compromise exemption that protects independent artists, songwriters and record labels along with the existing collective bargaining agreements was approved by multiple interested parties. And, without discussion, [it was] rejected by the AFM [American Federation of Musicians]”.  It will take an enormous amount of lobbying, phone calls and letters to legislators in order to have an exemption for the music industry considered next year. Click here for contact information for Lorena Gonzalez.

Why AB-5 Isn’t a Good Fit For Freelance Musicians, Artists, and Industry Professionals

Long before Uber and Lyft were twinkles in the eyes of their creators, musicians were pioneers of the gig economy. We’ve made successful business models out of working for a multitude of contractors, booking and managing our own schedules, negotiating our own rates, filing 1099’s, and managing our own tax reporting and insurances. Even the National Labor Relations Board defined freelance musicians as independent contractors.  Our contractors also thrived, hiring the musicians they wanted for specific gigs without the expenses of employment. Both parties will now have to drastically rework their budgets to account for payroll taxes, unemployment insurance, worker’s compensation insurance, etc. Employers will have to pay about 30% more, while employees will take home about 10% less. Who does benefit from the new law? The state is estimated to collect $7 billion in payroll tax revenue. Many people are asking how this will benefit the AFM since they voted in favor without discussion and without consulting their membership. 

What Can We Do Now?

The first step is understanding how our own business models will function under the new law.  CMG Music Recording is working hard to investigate AB-5, its implications, and how we can offer innovative solutions to independent professionals in the face of this looming challenge.  We offer the following as possible learning opportunities and solutions:

  • Based on suggestions from industry professionals, including film composer Brian Ralston, we suggest holding a Forum/Town Hall event where a panel of experts (music industry experts; representatives of Music Artists Coalition, American Federation of Musicians, Recording Industry Association of America; entertainment attorneys; CPA’s; legislators such as Lorena Gonzalez, etc.) can educate our local music industry about AB-5 and its potential ramifications, under one roof.  This forum should take place as soon as possible and include wide press coverage in order to reach the largest number of people working in the music industry. To have the most impact, this forum should be hosted by a large, well-known PR agency or association in order to reach the largest number of people. Please help spread the word by sharing this article and any other articles that help us to understand this issue. Is any agency or association willing to host and advertise this event?  You can call on the musician community, including CMG, for help putting it together but it needs to be hosted by a well-respected organization(s).
  • CMG Music Recording is also looking into the feasibility of offering a solution to independent composers, producers, musicians, etc. who are not yet in the financial position to incur costs associated with paying independent contractors as employees, such as payroll taxes and insurances.  We will provide more complete details as they become available.

CMG is committed to helping our industry thrive and finding solutions to empower and encourage independent professionals in our community but we can’t do it alone. We need to work together!  Please see the following resources to become educated on this important issue. There are copious amounts of additional information available online.

Forbes:  The Music Biz Will Split From California If The New Gig Law Sticks…

Billboard:  California Senate Passes Gig Economy Bill…

Hollywood Reporter:  Are Hollywood “Loan Outs” Done For?…

LA Times:  California has a new law for contract workers.  But many businesses aren’t ready for change.

LA Times:  California’s employment law was rewritten.  Many independent contractors aren’t thrilled

San Francisco Chronicle:  AB-5 gig work bill:  All your questions answered

USA Today:  California’s controversial labor bill has passed the Senate. Experts forecast more worker rights, higher prices for services.

Wikipedia:  California Assembly Bill 5

Calmatters.org:  Who’s in, who’s out of AB-5?

Articles regarding hiring employees in CA:

Gusto:  Here’s How Much It Actually Costs to Hire an Employee in California.

Justworks.com:  Run Your Business With Confidence

Photo courtesy of Asilvero [CC BY-SA 3.0 (https://creativecommons.org/licenses/by-sa/3.0)]

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