Ruling that a new California labor code section “regulates economic activity rather than speech,” the Ninth Circuit rejected First Amendment and Equal Protection challenges to the 2020 amendments to AB 5, a law that makes some freelance journalists employees instead of independent contractors.

Writing for a unanimous three-judge panel, Circuit Judge Consuelo M. Callahan affirmed District Court Judge Philip S. Gutierrez’s dismissal of a case initiated by the American Society of Journalists and Authors (ASJA) and the National Press Photographers Association (NPPA) that challenged the constitutionality of AB 5 and its amendments to California Labor Code sections that redefine how workers and independent contractors are characterized in the state.

The section covers a variety of freelance photography-related employees who work under written contracts that detail their pay rate and who are not replacing other employees. It clarifies that freelancers may work for other employees and may sell their products to other businesses unless prohibited to do so by copyright laws. Those working in the film industry are exempt.

The case was filed to rectify what the journalism-trade associations referred to as the narrower exemptions offered to journalism and photography freelancers than those given to other professionals. Plaintiff-appellants said that these discrepancies were “content-based preferences” that burdened journalism and the right to document matters of public interest. The judicial panel disagreed, writing that the law, enacted in 2019 and amended the following year by what is widely described as “clean-up legislation,” does not limit communication “nor restrict when, where, or how someone can speak.” Rather, it is “aimed at the employee relationship – a traditional sphere of state regulation.”

Callahan began her opinion with an explanation for the reason for AB 5, which she said: “was enacted to confront the misclassification of employees as independent contractors.” She said the legislature believed that wrongful classification eroded workplace protections, curtailed revenue to the state and contributed to “the “erosion of the middle class and the rise in income inequality.”

AB 5 codified several precedents of case law, primarily the ABC Test Dynamex Operations West, Inc. v. Superior Court of Los Angeles from a 2018 case. That test defines how independent contractors can be classified. Under Dynamex and AB 5, independent contractors must be “(a) free from the control and direction of the hirer, (b) perform work that is outside the usual course of the hiring entity’s business, and (c) be “customarily engaged in an independently established trade, occupation, or business.”

If this test is not passed, workers are classified as employees, and their employers thus would have to comply with a host of federal and state laws that regulate wages, hours and working conditions. They would also have to pay into Social Security as well as pay unemployment insurance, payroll, and state employment taxes that provide workers' compensation insurance.

Plaintiff-appellants moved for a preliminary injunction, centering their argument on the unfairness of “professional service exemptions” or the discrepancies in which employees should be covered under the new law. ASJA and NPPA argued that photographers, photojournalists, videographers and photo editors should receive the same treatment as doctors, lawyers, architects, engineers, accountants, fishermen, salesmen, investment advisors, and even their colleagues employed in motions pictures, who are exempt. Lower courts ruled that these professions are not “similarly situated.” Their request for a preliminary injunction failed and ASJA appealed. The Ninth Circuit also rejected their first and second appeals.

During plaintiffs’ journey through the courts, the California legislature wrote its “clean-up bill” that amended AB 5 with AB 2257, which enacted several new “professional service exemptions and clarified existing ones.” The amendments added the condition that freelancers may not replace employees who did the same work at the employee’s location, and the freelancers may not be restricted from working for more than one employer.

After describing the background of the case, Callahan delved into plaintiff-appellants' First Amendment arguments. She first explained that the new code sections are not content-based and thus not in violation of free speech protections. The judge said, “There is a distinction, however, between “restrictions on protected expression” and “restrictions on economic activity.” The new Labor Code sections, she said, are not First Amendment violations just because they may be “subject to government regulation.”

They do not limit communications nor “restrict when, where, or how someone can speak,” she explained, noting that instead, they were “aimed at” employer-employee relationships. She emphasized that the codification of Dynamex’s ABC test does not discriminate against journalism-related occupations, noting that “many occupations have no exemptions at all.”

Callahan also dismissed plaintiff-appellants’ Equal Protection arguments, saying that the law does not violate the Constitution because it “rests upon some rational basis.” She stated that under the law, different occupations are often subject to different rules.

The decision was affirmed because “The law regulated economic activity, not speech, and a rational basis supports the distinctions it draws,” she concluded.