Loading...
W2s for Production Crews: AB5 Was Just the Beginning
The battle of distinguishing production crew employees from independent contractors is age-old, and seeming allies don’t always line up on the same side of the table. But like any struggle whose weapons are pen and paper, often its ultimate resolution follows a significant catalyst.
California AB5 for Production Crew: A Review
If you’re shooting film, TV or commercial projects in California, you’re long familiar with the AB5 bill that went live this year and which we wrote about last November. As you know, it was primarily aimed at the gig economy (Uber, et al.), but caught the production crew workforce in its net, codifying into law the requirement of applying the so-called “ABC Test” to determine if a film crew worker is an employee or independent contractor. (Ironically, ‘Uber, et al.’ were able to get around the whole AB5 business with the voter-approved Proposition 22, which exempted their drivers and cost the companies some $200 million to promote.)
But do you know which other states that have similar legislation in the works, which will have an impact on production crew classification? Most have hewn closely to the California model, while New York has said it will actually exceed the standard set by AB5. Below we look at which states to keep an eye on for the W2 switcharoo.
Later we’ll take a gander at the surprising number of states that already follow the ABC Test to some extent for classifying production crews, even if they have no special legislation forthcoming.
Which other states have W2 / independent contractor bills in the works that could impact paying production crews?
While legislatures have had their hands full responding to the pandemic crisis, producers don’t want to lose sight of the states – New York, Illinois, Wisconsin, Oregon and Washington – that have been trending toward following California’s AB5 lead in becoming stricter about the misclassification of production crew workers as independent contractors.
Let’s take a look at how far along each is, to rate its potential impact on production crew payroll for film, TV and streaming content.
New York independent contractor classification for production crews
New York had certainly taken notice of California’s progressive AB5 measure, and became a top contender for passing similar legislation that could impact the film production workforce. New York Governor Andrew Cuomo believes the state is likely to follow California’s lead to protect workers by reclassifying them legislatively, but the way in which this will happen is still uncertain.
A whole new classification for gig workers?
In 2016, former Obama Labor Department official Seth Harris and Princeton University economist Alan Krueger first tested the waters on a new classification of “Dependent Workers.” This middle-ground approach would have given gig workers certain rights not previously available to them as independent contractors, without necessarily categorizing them as employees.
Senator Diane Savino and Assemblyman Marcos Crespo introduced a bill to officially create the new dependent workers classification in June 2019; though it stalled out then, Savino had plans to resurrect it in 2020 before the pandemic hit. An additional amendment would specifically provide workers’ comp benefits, minimum wage and overtime. We would not be surprised to see it resurface later in 2021.
Also in 2019, Assembly member Deborah Glick and State Senator Robert Jackson introduced a bill that more closely modeled the California AB5 law, and utilized the ABC test. This also didn’t pass, but Glick was encouraged to try again, with exemptions, in the coming sessions.
New York has the benefit of being able to watch how the AB5 measure plays out in California. State lawmakers are using this time advantage to build a customized system which they hope will avoid some of the blowback received by California by businesses and workers alike, including productions and their crews.
Though it’s too early to say which worker protection proposals will gain traction in the coming sessions, the production world will be watching.
Illinois on employee classification for production crew workers
Illinois state representative Will Guzzardi stands firmly behind the idea of following California’s lead in making short term workers be legally treated as employees. Like other Illinois state reps, Guzzardi believes that gig economy businesses “use (independent contractor) status as a loophole to get around labor law. It is an abuse that needs to be regulated.”
Guzzardi has shopped the idea around to his colleagues, and had asked his staff to draft legislation to be submitted in the spring of this year. With the pandemic sidelining this kind of legislation for 2020, the representative has made clear that the question is not whether to act on independent contractor misclassification, but how.
With Illinois having had a banner production year in 2019 and expecting to bounce back strongly from the pandemic, content producers and their crew workers will be watching this one closely.
Wisconsin task force could affect production crew classification
Wisconsin Governor Tony Evers formed a task force last year headed up by the Department of Workforce Development, which aims to put an end to payroll fraud and worker misclassification. The goal of the task force is to make tests much stricter, by adopting California’s method.
The main motivation from Evers appears to be the fact that 1099 independent contractors don’t generate unemployment insurance and other payroll tax contributions to the state, a known issue that draws unusually bipartisan support – and the real reason we think AB5 is just the beginning when it comes to independent contractor laws affecting production and their crews.
Quoth their website: “This issue is not unique to Wisconsin – employers across the country in certain industries commonly misclassify workers as ‘independent contractors,’ even when under the law those workers should be classified as employees.” The film and TV production industry is one that has been targeted nationwide.
The next step of the Wisconsin task force would be to move toward recommended legislation, which will impact not only the gig economy but all short-term employment – including film and TV production.
Oregon and Washington legislatures to weigh in on independent contractor status
Both Oregon and Washington introduced legislation in the 2019 sessions, to follow California’s lead in creating strict legislation which would clearly classify a majority of currently-classified 1099 independent contractor crew members as W2 employees.
The bills didn’t pass for either state in 2019, but there was talk of renewed momentum in both to change that in the 2020 sessions – talk which was necessarily sidelined when the pandemic hit the production industry and the workforce at large.
Production crews are not always excited by the change to employee status.
Much like gig workers who don’t always care for the protection of these statutes, film and TV production crew members on smaller projects are sometimes opposed to W2 employee status vs 1099 independent contractor arrangements.
Film crews accustomed to 1099s are sometimes dismayed to see their take-home pay go down when they first get on a W2 job – due to withholding that makes sure their taxes, unemployment and Social Security contributions are taken care of for them. We wrote this handy article here to help productions demonstrate for their crew why employee status is largely to their benefit.
Is it okay to pay my crew as independent contractors if there’s no AB5-like legislation in my state?
The short answer for producers? Not in most states.
It’s important to keep in mind that legislation like California’s AB5 is often just the codifying of existing labor guidelines which already allow state tax boards, unemployment offices and other agencies to go after production companies for misclassifying crew workers as independent contractors rather than W2 employees.
You might be surprised to learn that more than half of all U.S. states have already adopted some form of the ABC test. That means in one way or another, they’re already leaning toward having production crew workers classified as W2 employees rather than 1099 independent contractors.
Even without a state law, agencies including the IRS can and do pursue production companies for unpaid overtime, workers’ comp claims, back taxes and penalties.
More than half of all U.S. states have already adopted some form of the ABC test.
Other production states with the ABC test for independent contractor classification
We’ll list them all out with their particulars below, but first a quick reminder of what the ABC test is, as defined by the Dynamex ruling:
ABC test refresher for productions and their crew
The California legislature and State Supreme Court have mandated that a worker must meet all three of the following qualifications to be classified as an independent contractor rather than employee:
- The worker is free from the control and direction of the hiring entity [production company] in connection with the performance of the work, both under the contract for the performance of the work and in fact.
- The worker performs work that is outside the usual course of the hiring entity’s business.
- The worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed.
Some states use the ABC test for classification entirely, some mix and match, others use it for certain purposes. One thing is clear, almost every state incorporates some form of the question Is the worker free from the control and direction of the hiring entity? If the answer is no, as is the case for most productions, it often points toward your film crew meeting employee status.
Which film production states use the ABC test to determine employee vs independent contractor status?
Alaska – Uses the ABC test to determine worker status.
Arkansas – Uses some form of the ABC test to determine employment status for unemployment insurance eligibility.
California – Uses the ABC test to determine worker status.
Colorado – Uses A & C of the ABC test to determine employment status for unemployment insurance eligibility.
Connecticut – Uses the ABC test for wage and hour laws and to determine employment status for unemployment insurance eligibility.
Delaware – May use the ABC test in some sectors and may use some form of the ABC test to determine employment status for unemployment insurance eligibility.
Georgia – Uses some form of the ABC test to determine employment status for unemployment insurance eligibility.
Hawaii – Uses some form of the ABC test to determine employment status for unemployment insurance eligibility.
Idaho – May use some form of the ABC test to determine employment status for unemployment insurance eligibility.
Illinois – May use the ABC test in some sectors and does use some form of the ABC test to determine employment status for unemployment insurance eligibility.
Indiana – Uses some form of the ABC test to determine employment status for unemployment insurance eligibility.
Iowa – Uses some form of the ABC test to determine employment status for unemployment insurance eligibility.
Kansas – Employment security law relies on parts A and B of the ABC test.
Louisiana – Uses the ABC test to determine employment status for unemployment insurance eligibility.
Maine – Uses the ABC test to determine worker status in some sectors and does use some form of the ABC test to determine employment status for unemployment insurance eligibility.
Maryland – May use the ABC test to determine worker status in some sectors and does use some form of the ABC test to determine employment status for unemployment insurance eligibility.
Massachusetts – Uses the ABC test for wage and hour laws and to determine employment status for unemployment insurance eligibility.
Minnesota – State uses ABC test in some sectors and may use some form of the ABC test to determine employment status for unemployment insurance eligibility.
Montana – May use A & C of the ABC test to determine employment status for unemployment insurance eligibility.
Nebraska – Uses the ABC test to determine employment status for unemployment insurance eligibility.
Nevada – Uses the ABC test to determine employment status for unemployment insurance eligibility.
New Hampshire – Uses the ABC test to determine employment status for unemployment insurance eligibility.
New Jersey – Uses the ABC test for wage and hour laws and to determine employment status for unemployment insurance eligibility.
New Mexico – Uses a form of the ABC test in some sectors and may use some form of the ABC test to determine employment status for unemployment insurance eligibility. With Netflix and NBC Universal coming to town with serious production infrastructure, you can bet film and TV crews will expect to be paid as W2 employees here.
New York – Uses questions similar to some of the ABC test questions to determine employment status for unemployment insurance eligibility.
Oklahoma – Uses A and an option of either B or C of the ABC test to qualify a worker as an independent contractor, in which case the employer is exempt from unemployment insurance responsibility.
Ohio – Uses some ABC test questions, in addition to several others, to determine employment status for unemployment insurance eligibility.
Oregon – Has four different sets of questions, depending on the state agency (Wage & Hour, Workers’ Comp, etc.), for determining employee or independent contractor status. Many similar to ABC test questions.
Pennsylvania – Uses A and C of the ABC test to determine employment status for unemployment insurance eligibility, while using the entire ABC test and additional questions to define an employee for Workers’ Comp.
Rhode Island – Uses some questions similar to A and C of the ABC test to determine employee vs independent contractor status.
Tennessee – New legislation incorporates a slew of questions to determine employment status, some akin to ABC test questions.
Utah – Uses A & C of the ABC test to determine employment status for unemployment insurance eligibility.
Vermont – Uses the ABC test to determine employment status for unemployment insurance eligibility.
Virginia – Uses the IRS 20 questions as guidelines in determining employee or independent contractor status.
Washington – Uses the ABC test to determine employment status for unemployment insurance eligibility.
West Virginia – Uses the ABC test to determine employment status for unemployment insurance eligibility.
Wisconsin – Uses A & C of the ABC test to determine employment status for unemployment insurance eligibility.
Need help paying your crew as W2 employees? Reach out to us for employer-of-record payroll assistance.
