The California Assembly Bill 5 (AB5) is coming to fruition and many industries will feel the force of the new laws aimed at reclassifying contractors who have in the past suffered from a lack of employee protections. While it’s easy to see how these changes will affect companies like Uber and Postmates (because the most visible parts of their workforce are independent contractors), the entertainment industry will also face huge challenges that hit their bottom line.
If you’re a California-based studio, you’ll have to adapt to the change.
But what exactly does this mean California based studios? And what can be done to combat the changes?
What are these new laws?
The new bill requires company workers to be considered employees if their work is deemed within the regular course of the employer’s business – like being a driver for Uber, or a delivery person for Postmates.
If a ‘contractor’ is working full-time on-site at a studio, under the new laws they will be considered an employee. Ultimately, this means that the contractor will shift to a full-time role and have to receive the same benefits as a traditional employee.
What do these new laws mean for California studios?
The bottom-line: California studios that employ independent contractors will see a steep rise in the cost of working with them.
They will take on additional financial burdens like payroll taxes that will need to be paid on top of paychecks, and the need to offer the same HR benefits that current employees are receiving. This could have major implications for California-based studios, with approximately 2 million independent contractors set to be classified as employees.
Traditionally, independent artists are significantly cheaper for studios, and far easier to plan and budget for, given the project-based nature of the entertainment business. But now, the new laws will disrupt the status quo, and companies will have to make a change.
What options do these studios have?
Option 1: Accept the new laws and budget for an additional 15% per employee.
- This will be very costly and likely trigger employee layoffs or reduced pay to minimize the damage to the business’s financial statements.
Option 2: Protest the new law.
- While it’s likely the California entertainment business will unite to protest these laws, the ultimate result could be hefty fines, or at the very least hefty legal fees. Even if protests occur, there is no guarantee that it will delay or prevent the laws from being ratified.
Option 3: Leave the state to cut production costs.
- This is another high-risk, high-cost option, and there’s no guarantee the talent will follow.
Option 4: PolyPort.
Where does PolyPort come in?
PolyPort enables your team to work remotely and securely, so your studio can continue to work with independent contractors without the additional financial burdens.
Even though they are not based on-site, you can have peace of mind that your content is always secure, that work will continue as usual, and your labor costs will not be affected dramatically by the new laws.
Our encryption-embedded technology means that only authorized individuals can access your content, every edit is protected, and permissions can be removed at the end of a project.
With PolyPort, your talent, workflow, and operating costs will remain the same.
At a time where the best talents exist all across the globe, PolyPort enables safe, secure, and cost-efficient access to that talent – even if you’re based in California.
Schedule a demo now to find out how!