On Friday, April 17, a coalition led by the Music Artists Coalition (MAC) announced that an agreement had been reached on a music industry exemption to Assembly Bill 5 (AB5). Leader of Manatt Entertainment’s transactions and finance practice Jordan Bromley acts as a board member for MAC, and Bromley was the lead negotiator for the coalition of music groups, which also included the Recording Industry Association of America (RIAA), American Association of Independent Music (A2IM), Independent Music Professionals United (IMPU) and Songwriters of North America (SONA). The amendment exempts certain music professionals from AB5’s test, as explained below.
By way of background, AB5 was signed into law in September 2019, and most of its provisions went into effect on January 1, 2020. Under AB5, there is a presumption that workers in California are employees (and therefore not contractors) unless the employer can affirmatively prove three things (sometimes referred to as the “ABC” test): (A) that the worker is free from the control and direction of the hirer in connection with the performance of the work, both under the contract for the performance of the work and in fact; (B) that the worker performs work that is outside the usual course of the hiring entity’s business; and (C) that the worker is customarily engaged in an independently established trade, occupation or business of the same nature as that involved in the work performed.
In addition to codifying the ABC test, AB5 provided certain exemptions from the ABC test for specified industries; however, various groups have noted that they do not fall into one of the exemptions authorized by the legislature, including recording artists and the music industry. The announcement of agreement on a music industry exemption means that musicians and other recording artists will now need to meet the less onerous “Borello” test previously applied by California courts to determine whether the individual is an employee or independent contractor. Specifically, the Borello test’s principal factor is whether the putative employer has “the right to control the manner and means of accomplishing the result desired.”
This development ensures that the classification of certain individuals as employees will be controlled under this more flexible test—as it existed prior to the ABC test, providing much-needed relief to musicians and other recording artists who were unable to meet the ABC test. The groups who agreed to the amendment included the groups listed above, Assemblywoman Lorena Gonzalez (D-San Diego), Majority Leader Ian C. Calderon (D-Whittier), the American Federation of Musicians (AFM), the Recording Academy, the International Alliance of Theatrical Stage Employees (IATSE), Screen Actors Guild - American Federation of Television and Radio Artists (SAG-AFTRA), and the Teamsters.
Manatt will continue to provide updates on exemptions and changes to AB5, including the final language of this amendment when it becomes available.
Manatt’s press release can be read here.