Will a Biden Presidency Impact Freelancers in the Ad Industry?

A piece of legislation that President-elect Joe Biden said he intends to sign into law could potentially affect how freelancers secure gigs and make a living. Called the PRO Act, the bill, which passed the House earlier this year, largely focuses on strengthening workers’ rights and unions. However, some freelancers are taking issue with an aspect of the bill that’s been dubbed the “ABC test,” a three-pronged assessment that determines whether workers are considered employees or independent contractors. The ABC test is meant to prevent employers from misclassifying certain workers as contractors, thereby avoiding having to provide them the perks and benefits employees typically receive. Erin Hatton, an associate professor at the University at Buffalo who studies the sociology of work, said employers sometimes try to “evade their legal responsibilities for workers” by classifying them as contractors instead. As an example, Hatton pointed to FedEx, which has faced lawsuits for hiring drivers as “contractors” to save money on things like overtime pay. The ABC test aims to prevent such occurrences by clearly defining what makes someone a contractor. Under the ABC test, workers who do not meet the precise definition of a contractor are considered employees and therefore are entitled to benefits such as paid leave and workers' compensation. But the rigorousness of the ABC test—which is already in effect in California as part of a state law called AB-5—can make it difficult for freelancers to retain their status as independent contractors. Companies that can’t or don’t want to make their freelancers employees are forced to cut ties with them, leaving them with fewer opportunities. While the aim of the PRO Act is to protect workers from unfair treatment under a contractual agreement, it doesn’t necessarily take into account the nuances of freelancing. Freelancers often choose to work independently instead of being tethered to one company. They may not need or want the protections afforded by full-time employment. “The idea behind these laws is to protect workers that might be abused,” said Steve King, partner at Emergent Research. “There are plenty of workers who need those protections, but unfortunately, those laws are negatively impacting people who don’t.” What is the ABC test? To be considered a contractor and not an employee, freelancers have to meet the ABC test's three requirements. The “A test” essentially involves proving that they’re free from the company's control. King said the freelancer would need to show that they work on their own time and schedule; in other words, that they aren’t beholden to the company’s working hours or workplace. The idea behind these laws is to protect workers that might be abused.Steve King, partner, Emergent Research The “C test” is somewhat similar, in that it asks that the freelancer be established in a particular trade. According to King, establishing an LLC can help freelancers bypass this requirement, as it signals that the freelancer has their own business that offers a certain type of service to multiple clients. In essence, it illustrates that the freelancer works with various businesses and is unlikely to be at the whim of a particular employer. For freelancers that work at advertising agencies, the “B test” is arguably the biggest hurdle. This aspect of the ABC test basically says that freelancers cannot be hired for jobs that can already be done internally. For instance, an agency could hire a plumber as a contractor since advertisers don’t specialize in plumbing. Bringing on a freelance art director, however, would be a different story. “The freelancers that work with ad agencies almost all would fail the ‘B test,’ which is doing work that’s in the main line of work of that business,” King explained. “It’s kind of hard to argue that a freelancer doing any kind of creative work for an ad agency wouldn’t be required to be an employee.” How it impacts agencies and freelancers King said companies that do not comply with AB-5, which went into effect at the start of this year, can face significant fines. The law has forced advertising agencies in California to figure out ways to employ freelancers in a manner that is in compliance. Laura Small, senior vice president and people director at Los Angeles-based agency RPA, said she’s resorted to hiring them as employees for 90 days. The workaround lets RPA bring on freelancers for short stints with the understanding that they’ll part ways at the three-month mark, when the agency’s full suite of benefits would otherwise kick in. “You have to watch the time and cut it short,” she said. “I appreciate that the law was put in place to protect workers, but it can sometimes have the opposite impact when it impedes agencies from bringing people on or limits the amount of time that they can remain with us.” For Small, giving freelancers a premium rate, which RPA used to do, has become more difficult under AB-5 since she has to take into account the fact that some may opt to stay past the three-month mark—and therefore would receive benefits that cost the agency money. I appreciate that the law was put in place to protect workers, but it can sometimes have the opposite impact.Laura Small, senior vice president, people director, RPA “Budgets are so tight these days, and it can be hard to justify a higher salary when the person will be eligible for our benefits suite, whether or not they decide to take it. Some actually do,” she said. “When we bring people in now who would like to be an independent contractor, they get very frustrated because we’re not able to pay them what they used to receive.” Carolyn Bothwell is a freelance brand strategist and copywriter based in Massachusetts who works with clients in New York and Los Angeles. To date, she said AB-5 hasn’t affected her work in California, perhaps because she isn’t a resident of the state. However, she said the ABC test, particularly the B test, could eventually have an impact, especially if it becomes federally mandated. “I’m a copywriter, and I write for a number of agencies who also have full-time copywriters. That would really limit me from my work with agencies,” Bothwell said. That isn’t to say freelancers universally dislike the ABC test. For those who manage to pass its three prongs, it can have its intended effect. Take Callahan Peel, a digital marketing consultant based in Montana. Because she freelances for brands, not agencies, she believes she wouldn’t have an issue passing the B test. “Because I provide a specialized service to companies that is outside of their typical scope of work, I would easily pass the three-pronged test,” she said. “I believe that this will be beneficial for digital marketers like myself, as I can now point to this legal standard when setting client expectations. Unfortunately, I have several former clients who treat independent contractors like an in-house team member, without the benefits.” Looking ahead AB-5, which Biden has publicly supported, has already faced obstacles in California. In some cases, exemptions have been passed for professions that have been hit particularly hard because of the law. Freelance writers, for instance, were initially exempt from the law—but with a caveat. Since many freelance writers do the same type of work that journalists and reporters do as staffers, they fail the B test. AB-5 attempted to account for this problem by allowing freelance writers to submit up to 35 articles annually per outlet. Any more than that and they’d presumably be operating like an employee, according to the legislation, and should be treated as such. This hurt freelance writers in the state, as many are accustomed to writing considerably more than 35 articles per year for the publications they work for to make a living. Plus, many media companies can’t afford to bring on freelancers as part-time or full-time employees, especially this year. The stipulation made publishers hesitant to continue contracting with writers, delivering another blow. In September, the submission cap was removed following pressure from the freelance writing community. What we could see happen is a global outsourcing of those opportunities, especially in marketing and advertising.Rafael Espinal, executive director, Freelancers Union Other professions, including musicians, have had similar issues with AB-5 and demanded amendments. Perhaps most notably are gig workers who work for apps like Lyft and Uber. Under Prop 22, a California ballot measure that passed with 58% of the vote earlier this month, these drivers are able to keep their independent status as gig workers. Rafael Espinal, executive director of the Freelancers Union, said the law has “created a bureaucratic nightmare” that disincentivizes companies to hire locally. “What we could see happen is a global outsourcing of those opportunities, especially in marketing and advertising, where freelancers can work remotely to complete the work,” he said. He said legislators pushing for the PRO Act should “revise or scrap the ABC test” and approach the issue “in a way that provides justice for workers that are being exploited, while protecting professional freelancers’ ability to independently earn an income.” What, exactly, the PRO Act and ABC test would look like under a Biden administration is unclear, so it’s difficult to discern to what extent agency freelancers would feel the effects. “As president, Biden will work with Congress to establish a federal standard modeled on the ABC test for all labor, employment, and tax laws,” Biden's website reads. Regardless, King said the likelihood of such an act passing any time soon is unlikely. If Republicans—which he described as more “freelancer-friendly” than Democrats—retain control of the Senate, he said the bill won’t gain much traction. Even if it did pass, the act would still have to contend with state laws, King explained. Plus, he said, Biden is likely to focus on more pressing issues, like the pandemic, once he officially becomes president. “If I were running a medium to large-sized agency that was using contractors, I’d keep my eyes on it. But I wouldn’t be concerned about it specifically right now,” he said. “I’d be more concerned about the individual states and what they’re doing.”