Patrick Reed is a J.D. candidate, 2021 at NYU School of Law.
With the rise of Uber, Lyft, and an assortment of food delivery apps, the emergence of the “gig economy” has brought renewed attention the independent contractors who fill these services’ critical short-term roles. In contrast with these companies’ permanent employees, these independent contractors are exempt from laws governing minimum wage, healthcare, and overtime. The gig economy has grown to nearly 150 million workers worldwide and governments have struggled to craft legislation to regulate these temporary workers’ employment conditions.
On September 18, 2019, California Governor Gavin Newsom signed into law Assembly Bill 5 (colloquially, “AB-5”), which narrowed the definition of “independent contractor” and placed new employee wage and benefits obligations on individuals and corporations that hire temporary workers. The bill codifies a 2018 California Supreme Court decision, Dynamex v. Superior Court, 4Cal 5th 903 (2018), which held that temporary workers are presumptively “employees” and entitled to minimum wages and benefits unless the employer can demonstrate the workers meet Dynamex’s three-part “ABC” test.
Under Dynamex, and now AB-5, an employer shoulders the burden of proving a temporary worker is an independent contractor by showing that: “(A) The person is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact. (B) The person performs work that is outside the usual course of the hiring entity’s business. (C) The person is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.” The bill seeks to limit the employer practice of classifying temporary workers as “independent contractors” to circumvent employment law standards on minimum wages and benefits.
Recording artists, however, found themselves caught in the lurch. Independent musicians, who lack the resources associated with signing to major labels, often rely on the short-term “spec” agreements that classify sound engineers, session musicians, and roadies as “independent contractors.” As a condition of these agreements, these contractors will rarely receive pay until musical projects become sufficiently profitable. Even major music labels take advantage of independent contractors to produce expensive, chart-topping productions. Both major label and independent recording artists worry that the capital-intensive startup costs of creating payroll systems, providing health insurance, and minimum wages will chill artists’ willingness to produce new music.
Prong B of AB-5’s “ABC Test” stands to provide the most consternation to independent recording artists. Under prong B, musicians would have to demonstrate that each members of the technical and logistical support team for their records conduct perform work “outside the usual course of the hiring entity’s business.” However, the “usual course” of business could refer to as narrowly to the recording artist’s individual record (sound engineers and roadies often work with multiple artists concurrently) or broadly as the music industry at large. Since technical support like sound engineers and roadies usually only work for recording artists, escaping the employee designation under Prong B would be difficult.
Independent recording artists who decide to sign with labels would have separate copyright fears associated with AB-5. Under the Copyright Act of 1976, a “work made for hire” is “(1) a work prepared by an employee within the scope of his or her employment” or “(2) a work specially ordered or commissioned for use as a contribution to a collective work, as a part of a motion picture or other audiovisual work, as a translation, as a supplementary work, as a compilation, as an instructional text, as a test, as answer material for a test, or as an atlas, if the parties expressly agree in a written instrument signed by them that the work shall be considered a work for hire.” In work made for hire, the copyright holder is the employer, rather than the employee. Following the Supreme Court’s decision in Cmty. for Creative Non-Violence v. Reid, 490 U.S. 730 (1989), if an employee-created copyrighted work is a “work made for hire,” but a copyrighted work created by an independent contractor and is not commissioned for one of the pre-determined categories is not. Independent recording artists then face a difficult conundrum: either agree to work independently and pay for employee benefits to their technical support staff or agree to sign with a label as an employee and risk losing copyright protection for their works.
Independent musicians face legal and economic challenges to remaining in California following AB-5’s passage. Recording industry executives fear that independent musicians, who comprise the pipeline of musical talent to their labels, will flee California for states with more liberal employment laws. Absent future legislation narrowing the scope of AB-5 or exempting musicians entirely, California’s role as a hub for independent music may be in jeopardy.
Check out an earlier blog post about the affects of AB-5 on the entertainment industry here.