The Impact of California’s AB 5 Bill on Indie Filmmaking
California’s AB 5 is a bill that was signed into law in September 2019 addressing employment status. It requires the application of a “ABC test” to determine if workers in California are employees or independent contractors. Created as a attempt to curb Uber’s and Lyft’s use of independent contractors, the law has impacted all industries. This is important, as in the world of filmmaking, it’s a freelance world. You may get a gig that lasts only one day, or maybe a whole month. Due to the status of film production, finding anything consistent is a challenge. But now are you payed as a independent contractor or a employee?
So what’s the difference between a independent contractor and a employee? Well let’s say you run a office in the business of selling candy. One day your toilet breaks and starts leaking. Now you now to hire a plumber to come in and fix it. Since your business is not about fixing toilets, you can hire the plumber as a independent contractor and then provide with a 1099 tax form at the end of the year. Now let’s say you need to hire someone to help you make your candy. You will most likely need that person there every day to help out, and since selling candy is your business, that person must paid as a employee and provided a W-2 at the end of the year.
Calfornia's AB 5 aims to give everyone fair pay as a employee.
The AB 5 ABC test is as follows.
A. The individual is free from the control and direction of the hiring organization in connection with the performance of the work, both under the contract for the performance of the work and in fact.
B. The individual performs work that is outside the usual course of the hiring entity’s business.
C. The individual is routinely doing work in an independently established trade, occupation, or business that is of the same type as the work being performed.
Where film production actors and crew might be able to pass part A and C of the test, most will fail Part B. Since they are helping to create the movie and that is the the business of the production studio.
In the grand scheme of things, hiring a independent contractor is cheaper then a employee. When you hire a employee, you must withhold and deposit income taxes, social security taxes and Medicare taxes from the wages paid to an employee. Additionally, you must also pay the matching employer portion of social security and Medicare taxes as well as pay unemployment tax on wages, which amounts to about a 22% increase in cost. Also taxes are withheld for the payout as well, unlike a payment under a 1099. On indie film productions where the budgets are mirco, this can add a additional challenge into production. It’s quite often that mirco film productions will pay out often as a independent contractor, but technically they are require to pay you as a employee.
Some people are not for the bill, as they think it will limit opportunities.
When you are a actor or working as crew on set, you are required to be there at a certain time and are helping to create the movie. So under the AB 5 bill, you are a employee. Things can get a little murky when working a post house or VFX artist out of state. Since AB 5 doesn't apply to workers outside of California, even if the employer is based in California, film productions can have a easier time hiring contractors remotely. If hiring workers outside of the USA, then things get even easier as they can be paid as a independent contractor pretty easily.
In the indie scene, I’ve noticed a few productions have switch to platforms like Wrapbook, which helps aid in the Payroll and Production Accounting. But a few indie films will still pay under the table or attempt to still pay people as independent contractors. Some people have embraced the law, while others think the law is to constricting, costing them gigs and opportunities. A few big corporations have tried to appeal AB 5, but none have been successful so far. So in the mean time, be sure to know how you are getting paid on set.
