How California AB 5 affects creator classification and contractor status

What to take away

What California AB 5 changed for creators

Assembly Bill 5 was signed in 2019 and codified the ABC test from the California Supreme Court's decision in Dynamex Operations West v. Superior Court (2018). Before it, courts applied the multi-factor test from S.G. Borello & Sons v. Department of Industrial Relations (1989), which weighed many factors at once.

AB 5 replaced that balancing for the covered purposes with a strict three-part gate. The ABC test applies to the Labor Code, wage orders and the Unemployment Insurance Code. If a hiring business cannot pass all three prongs, the worker is treated as an employee for those purposes, regardless of what the contract says.

AB 2257, signed in 2020, amended AB 5 and added and narrowed exemptions. Those exemptions now sit in Labor Code sections 2776 to 2784. They cover categories such as professional services, business-to-business relationships and referral agencies, and some photographers, videographers and freelance writers may qualify if they meet the conditions in those sections.

Studios, agencies and networks felt this first. A production company that booked the same host for weekly branded segments, set the call times and supplied the gear looked like an employer under AB 5, not a client buying a deliverable.

How the test reached influencers

Early enforcement focused on gig drivers, but the same logic reaches creator work. A brand that controls the shoot schedule, approves every cut and pays a flat weekly amount looks like an employer. A brand that buys a finished video and lets the creator decide how to make it usually does not.

The ABC test applied to creator and agency relationships

The ABC test has three prongs, and the hiring business must satisfy all three. Prong A asks whether the worker is free from the hiring entity's control and direction, both under the contract and in fact. Prong B asks whether the work is outside the usual course of the hiring entity's business. Prong C asks whether the worker is customarily engaged in an independently established trade or business of the same nature.

Apply the test to a typical retainer. A skincare brand pays a creator a monthly fee for four posts, approves captions in advance and requires shoots at the brand's studio. Prong A likely fails, because the brand directs the work and the creator is treated as an employee for California purposes.

Apply it to a one-off campaign. A game studio buys a single 60-second review, the creator picks the format and keeps the raw files, and the studio has no say in the edit. Prong A is much easier to meet in that case, and prong C is supported by a business entity and other clients.

Where agencies lose the argument

An agency that supplies the creator, sets the rate and bills the brand under its own name is the hiring entity. If that agency also dictates the creative, prongs A and B both fail, and the agency carries the exposure.

When a creator is genuinely a contractor and when they are not

Genuine contractor status in California rests on independence in fact. The creator decides how the work gets made, owns the tools and can profit or lose on the job. A flat fee for a defined deliverable supports that picture.

Employment looks different. The business sets hours, requires attendance at internal meetings, supplies cameras and lighting and pays by the hour or week. A creator who cannot take another client without permission is not running a business.

Revenue mix matters. A creator with one client providing most of their income looks dependent, even with a signed contractor agreement. A creator with several clients and a registered entity looks more independent, which is what prong C tests.

Control over the final product is the sharpest line. If the brand can reject work for taste rather than for failing the brief, that is direction. If the brand can only reject work that misses the written spec, that is closer to a purchase.

The entity question

Operating as an LLC or corporation does not settle classification on its own, but it helps. It shows the creator holds themselves out as a business, which is what prong C asks about. The entity has to be real, with its own clients, invoices and bank account.

Studio and agency contracts that shift classification risk

Many studio and agency contract terms try to move classification risk onto the creator. The most common is an indemnity clause that makes the creator pay the studio's penalties if a regulator reclassifies the relationship.

Other clauses to watch include exclusivity, minimum availability, approval rights over the creator's other work and a requirement to use studio equipment or crew. Each one pushes toward employee status under prong A, so read them together rather than one at a time.

Some contracts state that the creator is an independent contractor and waive employee rights. That language does not bind a state agency. The ABC test looks at the actual relationship, and a label cannot cure control.

Payment terms matter too. Hourly and weekly rates read like wages. Per-deliverable and per-project fees read like contract work. Ask for per-deliverable fees with a kill fee before you sign, not after a dispute starts.

Insurance and benefits language

If the contract requires the creator to carry their own general liability and errors and omissions coverage, that supports contractor status. If the studio provides workers' compensation for the creator, that points toward employment.

Misclassification penalties and who pays them

Misclassification penalties in California fall on the hiring business. Under Labor Code section 226.8, a court or the Labor and Workforce Development Agency can impose a civil penalty of $5,000 to $15,000 for each willful violation. Willful means knowingly classifying a worker as a contractor to avoid employee status.

If the employer engaged in a pattern or practice of such violations, section 226.8 sets a higher penalty of $10,000 to $25,000 for each violation. The same section bars charging a willfully misclassified worker for items such as equipment or space rental.

Beyond that penalty, the hiring business can owe unpaid payroll taxes, unpaid overtime, expense reimbursements and unemployment insurance contributions. The Employment Development Department collects unemployment insurance contributions, and the Labor Commissioner enforces wage claims.

Federal rules run in parallel. The IRS applies its common-law factors, covering behavioral control, financial control and the relationship between the parties, and a business or worker can ask for a determination on Form SS-8. The Fair Labor Standards Act sets minimum wage and overtime obligations that follow employee status.

Creators can be pulled into these cases as witnesses, and a creator who signed a broad indemnity clause may face a demand letter from the studio. That is the real cost of signing without reading.

What a creator can recover

If a creator is reclassified as an employee, they may be owed unpaid overtime, meal and rest break premiums and reimbursement for business expenses. California wage claims generally have a three-year limitations period under Labor Code section 338, and some claims under the Unfair Competition Law can reach back four years.

New York and federal classification standards for comparison

New York does not use the ABC test. Its unemployment and wage authorities apply common-law control factors, which weigh how much direction the business gives, how the worker is paid and whether the work is part of the business's regular operations.

Because the standards differ, a creator who fails prong A in California might still be treated as an independent contractor in New York. Splitting an engagement across state lines does not split the analysis, so check each state's rules for the work performed in that state.

At the federal level, the IRS looks at behavioral control, financial control and the relationship between the parties. No single factor decides the outcome, which is why a creator with a written contract, a business entity and several clients has a stronger position.

Why the federal factors still matter

Federal factors drive payroll tax treatment and wage claims under the FLSA. Even a creator who passes the ABC test for state purposes can face a federal question if the working relationship looks like employment.

A creator guide to documenting contractor status

Documentation is the difference between a defensible contractor relationship and a reclassification case. Build the file before the first invoice, not after a dispute starts.

Tax paperwork reinforces the picture. Clients should send Form 1099-NEC for contractor payments, and platforms may send Form 1099-K. Both are consistent with contractor status. For a bigger-picture view of where your creator career can go next, see the creator career paths framework.

A worked example

A Los Angeles creator signs a six-month retainer with a beverage brand. The brand wants two posts a month, approves every caption and requires shoots at its studio on set days. The creator invoices monthly from an LLC.

Under the ABC test, prong A likely fails because the brand controls when, where and how the work happens. The LLC and the invoice do not cure that. If the creator is reclassified, the brand faces payroll taxes and penalties, and the creator may be owed expense reimbursements for studio travel.

Change one fact and the answer shifts. If the creator picks the shoot dates, writes the captions and delivers finished files, the brand buys a product rather than directing a worker, and the same fee looks like contractor income.

Records to keep

Keep contracts, invoices, briefs, revision threads and payment confirmations for at least the four-year period that can apply to some wage claims. Records that show who controlled the work are the ones that matter most in a reclassification review.

What to renegotiate before signing a studio deal

Start with the classification clause. Ask for language that describes the relationship as a purchase of deliverables, and remove any clause that gives the studio day-to-day control over how the work is made.

Push back on broad indemnity. If the studio wants the creator to cover misclassification penalties, cap that exposure or delete it. The hiring business controls the working conditions, so it should carry the risk.

Fix the payment structure. Move from hourly or weekly rates to per-deliverable fees with clear milestones, and add a kill fee for work canceled after the creator has started.

Narrow exclusivity. Limit it to the product category and the campaign window, not the creator's entire output. Broad exclusivity is one of the strongest signs of employment.

Keep ownership of raw footage and masters unless the fee reflects a full buyout. Retaining the files supports prong C and preserves future licensing income. For a fuller picture of what these deals pay, see brand deal income.

The one clause to never accept

Never accept a clause that lets the studio set your hours, require attendance at internal meetings and indemnify itself against your reclassification at the same time. That combination is the clearest signal of an employment relationship dressed as a vendor deal.

Common questions