SACRAMENTO, Calif.—On September 18, Gov. Gavin Newsom signed into law Assembly Bill 5 (AB5), which will make radical changes to both the state Labor Code and the Unemployment Insurance Code when it takes effect after January 1, 2020. The question is, how will these changes affect how adult performers and others involved in content production go about their business—and will those changes be better or worse for them?
The new law came about as a result of the California Supreme Court's decision in Dynamex Operations West, Inc. v. Superior Court of Los Angeles, which ruling found that many of the state's workers who had long been considered independent contractors should in fact be reclassified as employees of the companies for which they were doing work, and therefore be entitled to such things as minimum wage, overtime pay, unemployment insurance, workers' comp and several other "perks" that employees commonly get from the people/companies for whom they work.
This is an issue that has long been a sore spot for the nightclub industry, which has a long history of dealing with lawsuits filed by dancers seeking better pay and conditions from the clubs at which they danced. Many such suits have been successful, and the clubs ordered to pay their dancers the equivalent of minimum wage, not require them to "tip out" DJs and other club employees, and generally improve conditions under which they worked. The Dynamex case is reminiscent of those lawsuits.
AB5 is a fairly complicated bill, with "carve-outs" for certain industries to which the law will not apply, and according to knowledgeable sources, it's likely that more carve-outs will be added over the coming months—but what AB5 does, though, for most, is to create a set of criteria on which to judge whether a working person is to be considered an employee or an independent contractor. The criteria to affirm independent contractor status are:
(A) the worker is free from the control of the employer in connection with the performance of the work, both under the contract for the performance of such work and in fact;
(B) that the worker does work that is not in the usual course of the hiring entity’s business; and
(C) that the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed for the hiring entity.
But the question remains, what do those criteria mean in practice—and where will adult performers, for example, fall under them?
Take criterion (A): How much control does a production company exercise over actors that it hires to perform in a sex scene? While the company certainly pays the director, technicians and performers to create a scene that will eventually be sold on a DVD or website, it rarely tells the actors just which sexual positions to use during filming, and those actors often improvise dialog before getting down to sexual business. Does that mean the actor is "free from control of the employer"?
Attorney Jeffrey Douglas, who main practice is criminal defense, isn't sure how that will play out.
"That's a valid argument that is somewhat ambiguous, so it's something there might be a fight over that if there needs to be a fight," Douglas opined. "That is, if the state agency in charge of enforcement says, 'No, this is not an independent contractor, it's an employee,' that element is something they would be fighting about."
(Douglas admits that he hasn't studied the law in its final enacted form, but suspects that most of what was in earlier versions of the bill, which he has been following since the idea for it was first proposed last April, have made it into the final version.)
Also, the fact that an actor may do scenes for several different production companies over the course of a month—or even a week—may play into the question of whether each piece of content in which the actor appears makes her or him an "employee" of that company. After all, criterion (C) requires that in order to be considered an independent contractor, the person "is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed for the hiring entity." These days, it's common for adult actresses to engage in several varieties of content production such as shooting content for their own websites, trading content with other performers, webcamming, owning a clip store, running a fan club, and of course going on the road to dance at clubs. Are those different sources of income enough to fulfill the "independently established trade, occupation, or business of the same nature" criterion?
Again, Douglas wasn't sure.
"Let's say I'm a taxi driver and I work 30 hours a week for Yellow Cab, and then I do an additional ten hours a week as an Uber driver, I'm an employee of Uber. Now, the other issue, and this one I think is ambiguous, is that the services performed by the person is the primary business of the employer, meaning if I hire a roofer, someone to put on a new roof, and I'm advertising my services as a roofer, that will eliminate my ability to say he or she is an independent contractor. Uber's defense is, we are not a driving company, we're a technology company. That is going to lose."
However, in earlier versions of the bill, Douglas saw that among the "carve-outs" for such professions as doctors, attorneys, private investigators, commercial fishermen and a few others, there was at one point a carve-out for Hollywood film and television actors. That didn't make it into the final bill, but Douglas believes it may still have a chance.
"The reason that underpinned the carve-out for actors who work for multiple studios, at least in its early form, is that in fact, the producers are not selling actor services, they're selling completed movies," Douglas analogized. "Their business is entertainment distribution; the actor is a component of creating the entertainment but there's a lot more to it.
"The other thing is, this law doesn't take effect until January 1 and everybody says there's going to be a number of carve-outs that occur between now and then, and Hollywood is going to insist on a carve-out; that's 100 percent sure, and obviously tech firms have a lot of pull, but the vast majority of actors do want a carve-out, their union wants a carve-out, so they're going to get a carve-out, and the carve-out cannot realistically distinguish between Wicked Pictures and Sony Pictures, between 'North Hollywood' and regular Hollywood."
Others familiar with the adult industry have suggested that the change from contractor to employee might not be such a big deal.
"For performers, it's probably not going to have much of a negative impact, aside from the fact that they'll see less money," opined Dr. Chauntelle Tibbals, a sociologist who's studied the adult industry in depth, in an interview with Fortune magazine. "They're used to getting their day rate. Now they're going to have taxes taken out of it. It's also going to cost producers time and money to do that."
The bill was also lauded by Adult Performers Actors Guild president Alana Evans, who released a statement that read in part, "The passage of #AB5 in California is a massive win for gig workers in the state. As the list of workers affected by misclassification grows, the adult film performer has always been part of this family. Often labeled as independent contractors, workers in adult film are left without many benefits the average employee enjoys. Because we are misclassified by many companies hiring us, this means those companies forgo paying state employee taxes, while negating to pay into employee programs such as disability or unemployment insurance. Many of these companies also refuse to retain proper insurances for their productions, including workers compensation.
"As a worker in the adult industry, the moment you walk on to set, your employer is responsible for your safety and well-being. Being recognized as an employee will ensure you are protected, paid properly, and more prepared for your future. We often just accept the idea that things like 'payroll' are a nuisance because of deductions, when the reality is those deductions are also paid by the businesses that hire you. They are investing in your future as well, and while it may not seem important now, you never know when one of these benefits could change your existence."
But as noted earlier, many adult actors prefer to do business as they always have, and Douglas has a suggestion for how to accomplish that.
"What AB5 certainly does is, it gives yet another reason for a performer to incorporate and become an employee of their personal corporation," he said. "It just will make everything easier. First of all, the pre-existing tax benefits make it much better. There's paperwork involved; you have to file things on time and there's annoyances to it, but it eliminates any ambiguity or difficulty about your situation. The person hiring you hires your corporation, and your corporation pays you, and as I said, there's a lot of tax benefits and a lot of other things.
"One thing, though: Actors should absolutely talk to a knowledgeable lawyer about all of this, because they'll really need to."
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