🐈
» Forums » Coffee Break » California Assembly Bill 5 - Upwork Comment
Page options
trasies
Community Member

California Assembly Bill 5 - Upwork Comment

I have not seen where Upwork has released a statement regarding how California Assembly Bill 5 (AB5) is going to effect freelancers who live in California. I am curious if, and how, this bill will impact my ability to use the site. 

And, for anyone else in California who is following this, how many of you have looked into filing as a business so that you can conitnue to work as a contract worker? It is my understanding of Part C that creating a company may allow me to continue to freelance? 

 

ACCEPTED SOLUTION


Jessica S wrote:

Trasie S wrote:

I have not seen where Upwork has released a statement regarding how California Assembly Bill 5 (AB5) is going to effect freelancers who live in California. I am curious if, and how, this bill will impact my ability to use the site. 

And, for anyone else in California who is following this, how many of you have looked into filing as a business so that you can conitnue to work as a contract worker? It is my understanding of Part C that creating a company may allow me to continue to freelance? 

 


Bumping this up.. being that Upwork is a California-based company who uses contractors itself, I am curious as well as to how this will impact this platform.

 

https://www.sfchronicle.com/business/article/Senate-passes-AB5-gig-work-bill-turning-14430204.php?ps...


I am not a lawyer, however my understanding is this more directed at the type of services where the rate is set by the service provider (i.e. Uber). Putting aside contractors that Upwork may hire for their own services, I don't anticipate any changes to this platform. As Freelancers we set our rates and negotiate our terms directly with the client. In this way, Upwork functions as a lead generation site and an escrow company. The way the site functions (putting aside the silly talent specialists) doesn't, in my NON-LEGAL opinion mirror employment in any way.    
That said, as a CA resident, I'm not happy with this law. I would rather see market forces push down the Ubers and Postmates of the world vs. creating regulations around employment. Employers don't always want or need employees, and the more obstacles you create around hiring and managing the support you need (as an employer) the less inclined companies will be to follow ANY rules.

View solution in original post

93 REPLIES 93


Jennifer M wrote:

my god $800 to form an LLC? lol

 


Not only to form it, but to maintain it every year...

 

 

-----------
"Where darkness shines like dazzling light"   —William Ashbless

About Wyoming:

I think it is $50 to form LLC, plus an annual $50, plus whatever fee you are charged by a service provider (not required, but more convenient). You can do the whole thing online conveniently through a few places for $150.

 

That doesn't mean everybody SHOULD form an LLC in Wyoming, but if you need an LLC, and location does not matter, it is a more affordable option than going elsewhere.


DJ B wrote:

This is the biggest concern for me. Employers are going to be confused by the law and default to either hiring as W-2 or simply avoiding Caifornia-based freelancers altogether.

 

I don't particularly mind being paid as a W-2 employee as long as I keep my independent status (i.e.; not report to an office or be subjected to annual reviews if that's not what I want). A previous commenter mentioned being paid less because taxes are taken out as a W-2 employee. This is true, but in reality you still pay those taxes when you file, as self-emplyment tax (sometimes more). So you don't really get paid less as a W-2, it's just taken out in advance of filing your taxes.

 

Forming a company as an LLC or S-corp can help, but in California, you pay a minimum $800 fee whether or not you did any business that year. Other states are easier to do business in that way. It's tempting to leave!

 

I believe that after January, the CA legislature will be meeting again to discuss AB5 and hopefully correct what's wrong with it. It originated from Uber drivers who were concerned they didn't have union representation or benefits, but they didn't think through the repercussions and how many people (who actually want to be independent) would be adversely affected.


The problem with them taking more taxes is that in a w-2 job you almost always get ridiculous amounts of money back from the IRS and this is *bad.* You're just giving the government money and trusting they will give it back. lol You want to cut even ideally in April or at the worst owe a little bit and pay them. When I was w-2, I'd get like $4000 back from the IRS (Bad) now that I'm 1099, I can control it and basically cut even. Last year I got $300 back.


Jennifer M wrote:


The problem with them taking more taxes is that in a w-2 job you almost always get ridiculous amounts of money back from the IRS and this is *bad.* You're just giving the government money and trusting they will give it back. lol You want to cut even ideally in April or at the worst owe a little bit and pay them. When I was w-2, I'd get like $4000 back from the IRS (Bad) now that I'm 1099, I can control it and basically cut even. Last year I got $300 back.


That actually sounds like a withholding issue - not a W-2 issue.   🙂


Miriam H wrote:


That actually sounds like a withholding issue - not a W-2 issue.   🙂


yeah, I know you can claim like 5 dependents lol. But I always just claimed 1 like normal and would get thousands back.It started when I owned a home rather than renting.


DJ B wrote:

This is the biggest concern for me. Employers are going to be confused by the law and default to either hiring as W-2 or simply avoiding Caifornia-based freelancers altogether.

 


Yes, I do think that this is true, unfortunately. If I were a freelancer living in California, my bags would already be packed.

Could someone based in California please PM the email you received from Upwork?  I would like to send it to a client ASAP.

Or if a moderator could post a link to it?


Does not sound like a private thing. Sounds like something that would be useful to anyone working with California-based Upwork clients or freelancers.

 

As far as people leaving California goes... I read an article today saying that with the latest census data, California is going to lose at least one Congressional seat due to population loss.

Well, this is interesting... Some major companies are simply not going to comply with AB5...

 

Uber, Lyft, Postmates, Facebook and others are apparently going to skip this one...

 

Screen Shot 2020-01-04 at 6.10.27 PM.png

 

Screen Shot 2020-01-04 at 6.10.56 PM.png

 

Screen Shot 2020-01-04 at 6.11.21 PM.png

Interesting. What's the penalty for non-compliance? Presumably the bigger companies can afford it, or can afford to go to court. 


Christine A wrote:

Interesting. What's the penalty for non-compliance? Presumably the bigger companies can afford it, or can afford to go to court. 


My understanding, again non-legal, the penalty only is an issue if a worker brings a lawsuit - i don't think there is any audit or monitoring, but I could be mistaken. 


Miriam H wrote:

Christine A wrote:

Interesting. What's the penalty for non-compliance? Presumably the bigger companies can afford it, or can afford to go to court. 


My understanding, again non-legal, the penalty only is an issue if a worker brings a lawsuit - i don't think there is any audit or monitoring, but I could be mistaken. 


It sounds like you're right. From the article:

 

"Gonzalez says she hopes city attorneys and the state attorney general will hold gig companies responsible if they do not comply with the law."

 

She hopes?

 

Also, this:

 

"If you can't hold [Uber and Lyft's] feet to the flames, and [the law is] affecting people that it really wasn't supposed to affect, then something needs to be changed — and quick."

 

I read a news article somewhere with a quote from the Upwork CEO about this. They don't seem that concerned because they offer the W-2 option as well as the 1099 option. In fact, the CEO admitted they make more money off of W-2 jobs than 1099 jobs so it is in their interest probably for us to be classified correctly, unlike companies like Uber.

The question is whether clients will be reluctant to hire California-based freelancers or not, and whether California-based clients will be less likely to use freelancers. (The article mentions one large employer of freelance journalists that has already decided to stop using them and hire permanent staff instead, and they aren't the only ones.) There have been some calls to regulate the "gig economy" in Britain as well, so I'm following all of this with interest (and a bit of worrying).

This should worry every American. The 2009-2017 war on small business and entrepreneurship was the most successful war the American government ever waged. It severely damaged the most often successful route to financial independence and social mobility. Immigrants in particular were especially hard-hit, the most damage was done to immigrants of color and to women.

Yes, I'm a Grumpy Old Man. I don't trust this one bit. Seattle passed the new minimum wage bill and said it would only apply to large companies. Then they showed up at Mom and Pop franchises and told them that, for example, Subway has tens of thousands of workers nationwide, so their franchise, with nine workers, is a large business. Los Angeles passed a minimum wage law that would only apply to businesses that were not unionized, on the theory that unions would stand up for workers' rights. The net effect was a large recruiting drive by hotel and other service workers unions, affecting mostly minority groups and immigrants. The pitch was compelling: Help us unionize your workforce, and we'll agree to reduce workers' wages. You can't make this stuff up.

 

This will drive small businesses into being acquired at pennies on the dollar, and reduce entrepreneurial opportunities for immigrants and minority groups. That is what happened 2009-2017. Interestingly, it also puts pressure on independent journalists and can create a chilling effect on freedom of the press. Prosecutorial discretion will let prosecutors carefully monitor investigative journalists who are looking into things government doesn't want made public. Their livelihood can be threatened, although they have an out - just become an employee of a large media company, where you're subject to firing if you try to blow the whistle. At least if you try to blow the whistle on **Edited for Community Guidelines**. You can look for more and more jurisdictions passing similar laws, if only for the control government gains over independent journalists. The ability to quash entrepreneurs is just a bonus.

 

**Edited for Community Guidelines**. By people who claim they are the champions of those groups. Makes you wonder what else they're lying about.

I am a California freelance writer. How is this going to affect me?

Hi Charlotte, 

 

Thanks for reaching out. Unfortunately, we cannot provide tax advice, please consult with a trusted tax advisor. 


~ Avery
Upwork


Avery O wrote:

Hi Charlotte, 

 

Thanks for reaching out. Unfortunately, we cannot provide tax advice, please consult with a trusted tax advisor. 


Hi Avery,

 

I think you might have misunderstood the question. AB5 is an Assembly Bill passed in California that limits how much a California freelancer can work for one particular company/entity. It's huge news in the freelance world. Is this something Upwork will be advising on, or has any links to? Clients and California freelancers could get themselves into a lot of hot water if the law is violated. Kudos to Charlotte for being forward thinking and checking in to see if Upwork has any advice! I'd be interested too if Upwork has any information. I'm a former Californian and would love to go "home" one day but this bill makes it so I can't work in the state of California as a freelancer, not even for my former managing editor! Thanks!

re: "I think you might have misunderstood the question."

 

The Forum Moderator understood the question.

 

She answered correctly:

Which is to point out that Upwork is not going to provide tax advice.

 

Furthermore, Upwork is going to mostly stay silent on the matter. Upwork is not going to publicly prognosticate about how the new law will affect individual freelancers.

 

However, Upwork has allowed its users to discuss the topic here in the Community Forum, including in this thread.

 

As an Upwork user, I can offer my opinion: I think that AB5 will be bad for freelancers who live in California, and bad for businesses located in California. I encourage all freelancers who vote for this sort of thing and vote for the politicians who support this kind of thing to stay in California. I encourage all freelancers who vote against this sort of thing to leave the state and relocate to someplace which is not anti-freelancing and anti-business.

I agree with you right up until your last paragraph. Similar laws are being proposed in almost a dozen states, there is a proposal for a Federal version of the law that is working its way through Congress and I believe there is a federal law that goes into effect this year that forces businesses to have SOWs in place for ICs so there is no chance of exploitation. There seems to be a trend against ICs and Freelancers, and I am working hard to contact my representatives to let them know that these laws are anti-business and don't make sense in a technologically driven society. 

Keep in mind that I, like many of the participants in this thread are proud Californians who would rather stay and change this law than leave. 

re: "I, like many of the participants in this thread are proud Californians who would rather stay and change this law than leave."

 

I hope you will and everyone else who agrees with you about this will succeed in efforts to change this for the better.

Upwork has sent an email that basically stated it is up to California freelancers and companies that work with California freelancers to understand the law. I was hoping for better guidance from Upwork, but based on its business model its response is reasonable. 

a_lipsey
Community Member

As a California resident, I discussed AB5 with my business advisors and attorney and determined that it did not affect me. One thing you can do, if you are unsure, is contact your local SCORE branch, which provides free resources to small business owners, including free mentoring from retired, successful CEOs and subject matter experts, and get some guidance on how it might affect you. 


charlotte k wrote:
I am a California freelance writer. How is this going to affect me?


Hi Charlotte,

Isn't AB5 wonderful? Not! I'm a California native, and started my journalism career in that state, and in 2015 moved out of state and began freelancing. Unfortunately, it's preventing me from ever going home again, not if I want to work anyhow. I freelanced for my managing editor, and I wouldn't even be able to do that now.

 

As to your question, I think you'll be OK becuase you can do up to 35 projects for one particular company/entity in a year. That's not as common at Upwork ... although I do have two long-term projects with no real ending dates. This will be something you'll have to discuss with any prospective clients, and you definitely need to make sure you understand the law, top to bottom. 

 

Good luck!

So far, no one knows how it will play out. At worst, clients won't want to
hire CA freelancers if they are going to get in trouble for violating labor
laws. At best, everyone ignores this misguided law and just goes on with
business. But there is at least one online freelancing platform (TB) which
has now restricted CA writers to 34 jobs per year due to AB5.

re: "At best, everyone ignores this misguided law and just goes on with business."

 

That is pretty much what companies such as Uber and Postmates have said they are going to do.

 

But they might not be COMPLETELY ignoring it, but adjusting to it.

 

Uber is a company that provides software used by freelance drivers. In order to ensure that they will not be subject to AB5, Uber announced this week that they are testing a modified version of their software in California which lets drivers set their own rates.

No one can say exactly how AB5 is going to affect freelancers, which is part of the problem.

 

The good news is that there is at least one CA legislator who is working to overturn AB5. There is a rally in Sacramento on January 28th to address the ridiculousness of the law. https://twitter.com/KevinKileyCA

Upwork ignores this law at their own peril. Burden of proof falls on the "employer" not the employee (or contractor).

... Thank you for sharing the rally, I missed it by 5 hours, but I will look into the aftermath.

re: "Upwork ignores this law at their own peril."

 

Nobody has said that Upwork is ignoring this law.

Thank you for sharing the excellent article. I hope it and others are widely read. The more people who read about the negative efffects of AB5, the better chance there will be that it is rescinded.

 

From the article:

"Almost no one, though, expected the sort of overnight devastation that the passage of AB5 has wrought on California freelancers... Clients are notifying long-time freelancers that they’ll no longer be able to use their services, effective immediately. Large content agencies are hanging out “No Californians Need Apply” signs, and people who have spent years or decades building great careers that draw on their greatest strengths and leave room for their lives are abruptly without income"

zippyzajac
Community Member

Hello upwork.

 

I have a question before starting upwork. I am from California and want to start working as a Virtual Assistant as a freelancer with upwork.

 

I read the term on payroll about taxes and W2. Do you know if upwork is classified as employment? Right now the California passed a new employment law called the AB5 that limits freelancers and Virtual Assistant I believe is on the blacklist.

 

Will you still be accepting freelancers from California? The new AB5 will for sure hurt the app drivers such as uber and lyft meaning it will go back to the taxi style and fees will go up. the governor did that to get more taxes.

 

Thank You,
Matt

re: "Do you know if upwork is classified as employment?"

 

Traditionally, we have always said "no."

 

I know that the work I do now on Upwork is NOT employment. It is freelancing. I am considered a small business (one person) who provides business-to-business services.

 

But if you live in California... with this new law... I have no idea what to tell you. I don't even think Upwork knows what to say right now. It is all very new. You may be better off talking to local experts. If you talk to local tax experts, lawyers, accountants, etc., you should be able to get some different opinions and options. They should be able to help you figure out how to work in a way that best serves your needs and goals.

 

re: "The new AB5 will for sure hurt the app drivers such as uber and lyft meaning it will go back to the taxi style and fees will go up. the governor did that to get more taxes."

 

I agree.

 

If Upwork wanted to make a supremely smart move, it would move from California to Arizona.

 

That tip is like one million dollars worth of consulting service, which I'm freely giving to Upwork.


That is not necessarily AB5-related advice. There are lots of reasons that companies are moving from California.

 

Such a move would benefit Upwork as a company, and it would benefit Upwork freelancers and clients.


Matthew Z wrote:

Hello upwork.

 

I have a question before starting upwork. I am from California and want to start working as a Virtual Assistant as a freelancer with upwork.

 

I read the term on payroll about taxes and W2. Do you know if upwork is classified as employment? Right now the California passed a new employment law called the AB5 that limits freelancers and Virtual Assistant I believe is on the blacklist.

 

Will you still be accepting freelancers from California? The new AB5 will for sure hurt the app drivers such as uber and lyft meaning it will go back to the taxi style and fees will go up. the governor did that to get more taxes.

 

Thank You,
Matt


You won't be considered to be an employee of Upwork (as I understand it); but the new law may apply to the clients who hire you. If you're a virtual assistant - someone who does long-term work for clients and assists with the day-to-day operations of their business, as opposed to someone who does one-off gigs - then you should definitely seek expert advice and if you decide to go ahead with Upwork, maybe put something into your profile to explain how the new laws would apply to anyone who wants to hire you. But to be honest, there are already thousands of virtual assistants on Upwork and it's difficult enough for them to get hired; I would think that if you're located in California, it'll be even harder for you. So you might want to think about whether there are different skills that you can offer as a freelancer, or other ways for you to get work.

Matthew,
This is actually an issue for companies like mine who hire freelancers to do work for us on Upwork. If we hire a freelance person in CA under the new law we can only allow them to do 35 projects for us in one year unless we have them as an employee, meaning we have them on our payroll and we take out taxes state and federal as well as match FICA, (Social Security and Medicare) and we issue them a W-2 not a 1099. It also opens us up to having to provide freelancers with full employment benefits, health insurance, paid leave and the list goes on.
Since we DO NOT employee freelancers, we will NOT be hiring any freelancers in CA to do work for us unless they are an official business, corporation and or LLC and registered with the California Secretary of State. We aren’t going to take on the tax liabilities that the state of California wants us to. This new law is horrific and we have had to release two dozen California freelancers as of January 1. We have spoken with our general counsel about using Upwork period and they are looking into the legalities of using this service because Upwork is a California based company and while the platform has freelancers around the globe on the platform, because we are a California based business and Upwork is a California based business any contractor we hire off this site no matter what state or country they live in could expose us to tax liability.

 

Sincerely,

 

Narroway Publishing LLC/Imprint: Narroway Press

Roy makes many excellent points.

 

I think the simplest and safest policy is for any companies which are not based in California is to not hire any California-based freelancers.

 

Also, California-based companies should not hire any California-based freelancers.

 

There is simply no reason to risk getting fined or sued or otherwise penalized by California over this law.

 

And it makes no sense to have to pay extra to treat freelancers as employees because of this new law. (A law which is actively being disputed in court by Uber, Postmates.)


Preston H wrote:

 

I think the simplest and safest policy is for any companies which are not based in California is to not hire any California-based freelancers.

 

Also, California-based companies should not hire any California-based freelancers.

 


This is ridiculous advice. I am a legitimate business and not affected by AB5. You are adding to spread of fear and panic that is unjustified for many. It is highly dependent on what you are hiring for whether or not you should be worried about AB5. For example, AB5 specifically excludes certain professions. My profession is already recognized and licensed by the state of California - I can't be a grant writer in this state without being licensed as a professional fundraising consultant. There are a great many consultants residing in the state who this law has no effect on and businesses can feel safe hiring them to do work for them without fear of penalties. 

 

Please stop advising people to stop hiring California freelancers based on absolutely nothing other than speculation about how a law might affect them. If a business is concerned about AB5 they should consult their attorneys. If a freelancer or consulting busienss is concerned, the same applies. No one should rely on random advice from a stranger on an online forum for legal advice. And frankly shame on you for trying to harm the business of California-based consultants. 

Amanda - +1000 kudos.  

And 5k more kudos to Amanda ....

I'm going against the reasoned views of a lot of people I respect a great deal with this, but I agree with Preston. In most cases, I think it would be foolhardy for a client to take on a California freelancer during this very uncertain period without legal advice. While there are a great many client/freelancer relationships that are fine under the law (Amanda presents a good example: as a grantwriter presumably providing services to the non-profit in question, she passes prong B of the ABC test--the one that presents problems for many freelancers even if they are clearly freelancers in every other way). 

 

But, there is a lot of misunderstanding of the law, and a lot of areas in which even its authors have admitted it remains to be seen how they'll be applied. And, there is widespread misunderstanding of the so-called "B2B exemption" that makes many freelancers think the statute doesn't apply to them at all. 

 

Treading carefully is just good business, at least until the dust settles.

Latest Articles
Learning Paths