From JDSupra, Manatt, Phelps & Phillips, LLP discusses the decision by the Ninth Circuit Court of Appeals that AB5 does not violate the First Amendment or Equal Protection Clause by classifying journalists as employees instead of independent contractors. Manatt, Phelps & Phillips write:
Assembly Bill 5 regulates economic activity and not speech, the U.S. Circuit Court of Appeals for the Ninth Circuit recently held, affirming dismissal of a suit brought by freelance writers and photographers challenging the law.
The dispute can be traced back to the California Supreme Court’s 2018 decision in Dynamex Operations West, Inc. v. Superior Court of Los Angeles, where the court adopted the ABC test for ascertaining whether workers are employees or independent contractors. The test defaults workers to employees and permits businesses to classify workers as independent contractors only if they satisfy three requirements.
In 2019, the state legislature codified the ABC test and expanded its applicability beyond wage orders when it enacted AB 5. Lawmakers gave several reasons for the bill, stating that misclassification caused workers to “lose significant workplace protections,” deprived the state of needed revenue and ultimately contributed to the “erosion of the middle class and the rise in income inequality.”
AB 5 did not apply Dynamex universally, however. Instead, the standard used before Dynamex—a multifactor test derived from the S.G. Borello & Sons, Inc. v. Department of Industrial Relations case—applied for many occupations and industries, such as doctors, lawyers, architects and certain commercial fishermen.
It also narrowly exempted those engaged in enumerated “professional services,” defined to include freelance writers and photographers.
The American Society of Journalists and Authors (ASJA) sued. The group argued that the exemption was too narrow and offended the First Amendment and Equal Protection Clause and burdened journalism by forcing freelancers to become employees, reducing their work opportunities and inhibiting their “freedom to freelance.”
The ASJA moved for a preliminary injunction and a temporary restraining order. A district court judge denied both and dismissed the lawsuit, and the ASJA appealed.
The Ninth Circuit affirmed, rejecting the ASJA’s argument that a worker’s likelihood of being classified as an employee, rather than as an independent contractor, turns on the content of the work.
The court pointed out that restrictions on economic activity are permissible and distinct from restrictions on protected expression. Consistent with this understanding, the Supreme Court has denied First Amendment challenges to the Fair Labor Standards Act, the National Labor Relations Act, the Sherman Act and various taxes.
AB 5 “fits within this line of cases because it regulates economic activity rather than speech,” the panel wrote. “It does not, on its face, limit what someone can or cannot communicate. Nor does it restrict when, where, or how someone can speak. It instead governs worker classification by specifying whether Dynamex’s ABC test or Borello multi-factor analysis applies to given occupations under given circumstances. In other words, the statute is aimed at the employment relationship—a traditional sphere of state regulation.”
The rules understandably vary based on the nature of the work performed or the industry, the court said, but “whether employees or independent contractors, workers remain able to write, sculpt, paint, design, or market whatever they wish.”
Although the panel recognized that the ABC test may make it more likely that some of the ASJA’s members are classified as employees, which may in turn impose greater costs on hiring entities and reduce overall job opportunities for freelancers, “such an indirect impact on speech does not necessarily rise to the level of a First Amendment violation.”
Having determined that AB 5 does not implicate the First Amendment, the panel applied rational basis review to the ASJA’s Equal Protection Clause claim and had little difficulty ruling that the statute’s occupational classifications are rationally related to a legitimate governmental interest.
Nothing about the law suggests that its classifications border on corruption, pure spite or naked favoritism lacking any legitimate purpose, the court said; instead, “like many other employment laws, [it] permissibly subjects workers in different fields to different rules.”
The Ninth Circuit affirmed dismissal of the ASJA’s suit.
To read the opinion in American Society of Journalists and Authors, Inc. v. Bonta, click here.
Why it matters: The Ninth Circuit decision is the latest battle in California’s long-running war over the classification of workers, with the federal appellate panel previously ruling that Dynamex has retroactive application and that federal law doesn’t preempt AB 5.