A first look at AB5's musician exemption: what we know and what we don't know

Recently, Assemblywoman Lorena Gonzalez, the sponsor of AB5, announced that following months of negotiation the long-awaited musician exemption had finally reached a draft final form. She issued a press release and bullet points about the musician exemption and its intended effects.

According to the Assemblywoman herself, the text of the exemption can't be released until the legislature is back in session. So, for now, we can only analyze the bullet points about the exemption. Therefore, as with everything on our website, none of this information should be construed as legal advice, especially when, as here, we are only extrapolating from a description of the bill rather than from its actual text.
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To be clear on what the musician exemption -- or any 'exemption' -- means in the context of AB5: AB5 is a law that imposes a test called the ABC test on all business relationships in California. (By "business relationship" we mean any contractual relationship between two people or entities where one pays money in exchange for the other's labor or services.) Unless a business relationship passes the ABC Test, the entity in that relationship who is paying the money must do so as a W2 employer, and is prohibited from doing so on an independent contract basis.

Under AB5 without  the musician exemption, most business relationships in the music world fail the ABC test. A songwriter hiring a recording engineer; an event planner hiring a band for a gala; a bandleader paying the other players for a gig; an early music consort paid through an LLC or nonprofit -- all these business relationships and more would fail the ABC test, meaning that in each of these instances, the entity paying the money would be required to do so on an employment basis, and would be prohibited from doing so on an independent contract basis.

Enter the musician exemption. The musician exemption specifies that certain types of business relationships in the music industry are not subject to -- i.e., are exempt from -- AB5's ABC test, and are instead subject to the common-law control test (often called the Borello test) that, before AB5, had successfully governed these types of relationships for decades and decades. Under the Borello test, many more of the musical business relationships are permitted to continue on as independent contract relationships.

Which types of musical business relationships are exempt? Let's take a look.


The Recorded Music Industry

The first thing the musician exemption appears to do is divide the music industry into two segments: the recorded music industry and the live music industry. More on this move later.

The recorded music industry, for its part, appears to be the clearest beneficiary of the musician exemption. Very generally speaking, it appears that the entire industry for recorded music is generally exempt from AB5's ABC test. If the work being done in any way involves "the creating, marketing, promoting or distributing of the sound recording or musical composition," that worker's business relationship is not subject to the ABC test, but is instead subject to the Borello test, under which an independent contract relationship is likely permissible.
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​The Live Music Industry: "Standalone live performances" vs. ???

Once the exemption divides the industry into recoded and live music, the exemption proceeds to divide the live music industry into two further parts: "standalone live performances" and...well, something else. The general idea is that standalone live performances are exempt up to certain venue sizes (headliners in venues with 1500 or more attendees, and musical groups at festivals with more than 18,000 attendees per day). As for the something elses that are not standalone live performances, whatever those relationships are, they are not exempt.

This is where things get dicey. Gonzalez's press release indicates that the "something else" relationships (i.e., the nonexempt relationships) are "instances where the nature of a musician’s work inherently draws a significant level of control and direction from their employer," and gives theme park musicians, symphony orchestra musicians, live touring musicians, and musicians involved in musical theater productions as examples.

It is not clear from the press release whether these four examples constitute an exhaustive (i.e., complete) list of work relationships that are not exempt, or if these are meant merely as examples from a larger list.

If these four examples are an exhaustive list, many unanswered questions arise. If standalone performances by a band are exempt and symphony orchestras are not exempt, what about a performance series by a band that spans three nights? What about a string quartet that does a three-weekend concert series? A revue band that performs once a week at a particular bar/nightclub? None of these is a "standalone performance," yet none of these falls into any of the enumerated categories. How are they to be classified under the musician exemption?

If these four examples are not an exhaustive list, but are instead examples from a larger list, it's also not clear what this larger list of non-exempt situations is. Defining the larger list as "instances where the nature of a musician’s work inherently draws a significant level of control and direction from their employer" really just begs the classification question by restating the classification test without providing any meaningful lines in the sand. The problem is that there is a spectrum between (1)  a garage band that does a handful of one-off performances per year at local bars and clubs and (2) an established city symphony orchestra that maintains a roster of players who rehears and perform several scheduled-out concert cycles per season. The exemption appears to be attempting to draw a line somewhere out in the middle of the vast expanse between these two extremes. We don't know exactly how this line is going to be drawn, and the answer is going to have an immediate effect on thousands of California's musicians, ensembles, and arts organizations.

There's another area of uncertainty that we skipped over. Remember when we said earlier in this section that standalone live musical performances are exempt? Well, the full story isn't quite that simple. The press release expressly indicates that in most standalone live performance situations, the musicians are permitted "to collaborate with one another in their live performances, without becoming each other’s employees."

We added the italics to that quote to emphasize our concerns with this language. Musicians are exempt when they are paying "each other," but what about the other necessary transactions? Take a typical scenario where a restaurant hires a band for a single performance on a Friday night. The exemption makes relatively clear that the musicians are permitted to contract with one another -- i.e., that once the bandleader receives the lump-sum check from the restaurant for the performance, he or she can then forward the band members their individual payments without having to make those band members his or her employees.

But what about the restaurant's payment to the bandleader? This is the relationship that many musicians have been concerned about. Before AB5, it was relatively clear that the restaurant could pay the bandleader as an independent contractor. However, under AB5 and its ABC test, which constitutes the strictest version of the employment classification test known to American law, the restaurant may very well have to hire the bandleader as an employee. The use of the language "each other's" in the press release gives us concern that the exemption really only applies when one musician directly pays another musician, and that the relationship between the restaurant and the bandleader is being left out of the exemption.

Is your head spinning yet?


Music Educators

Many have asked whether music educators are considered in the exemption. Although some of the representatives who helped negotiate the exemption had music education experience, we observe that none of the people who negotiated the exemption were specifically representative of music education and the specific needs of that industry.

The exemption reflects this reality. Only those who play instruments or compose musical compositions appear to be addressed in the exemption. This likely means that music educators, music therapists, and others who use music in educational, healing arts, and non-performance fields will not be able to take advantage of the musician exemption. 


What we don't know

You can see so far that the musician exemption raises more questions than it answers. Apart from the above, there are many, many more musical business relationship situations that do not appear to be clearly and unambiguously addressed by the press release about the musician exemption. Here is a small sampling of such situations:

• A classical performance ensemble commissions a composer to write a piece for an upcoming concert
  
  
• A producer engages a symphony orchestra for a sound recording project
  
  
• An opera nonprofit engages opera singers to perform in a production of an opera, where three performances on three separate nights are offered
  
  
• A producer hires musicians to perform in a music video
  
  
• A Christmas caroling organization contracts with carolers to match quartets to performance opportunities throughout the holiday season?
  
  
• If a musical group delivers a live performance that is also being recorded for later release on Spotify, is that project a music production project or a live music project?
  
  
• And what about interdisciplinary projects? If an actor plays cello several times during an otherwise spoken show, is that actor a musician for the purpose of the exemption? Or, conversely, if a pop group hires some performers who function as both backup singers and backup dancers, do those individuals fall inside or outside the musician exemption?
  
  
• And how do DJs who perform live sets fit into the scheme?

​The broader perspective: the process itself

We will, of course, continue to keep this blog updated with what we learn about the musician exemption. For now, we'll conclude with a brief comment about the process of arriving at this musician exemption and why we believe it doesn't bode well for other industries. Even now, the text of the exemption remains under wraps, and the public will not have a chance to see it or comment on it until shortly before it gets voted on. If this secretive process is replicated as other industries seek exemptions, we can be sure that those exemptions will likewise fail to reflect the needs of the people.

Moreover, the players that negotiated the musician exemption did not constitute a representative cross-section of the California musical community. Of the ten organizations that negotiated the musician exemption, only one of those organization was specifically called upon to represent the interests of independent musicians. That organization did a valiant job of representing small bands, arts nonprofits, music education, classical music, and interdisciplinary arts, but in the end, it was only one voice of ten, and it could only do so much to speak up for the needs of these industries by shepherding them into the exemption. The fact that our lawmakers were unable to make sure that a representative coalition helped craft the musician exemption does not bode well for future efforts in other industries.

Finally, as the overall length and complexity of this post indicates, the broadest point that we want to keep track of in this discussion is that AB5 is a bad law. It does not make sense to write a law that essentially requires nearly every business relationship to be an employment relationship, only to then painstakingly carve out potentially hundreds of exemptions that slice and dice across each respective industry. AB5 is a textbook example of bad legislation, and we believe that our lawmakers, with our support, can do better.

If you're concerned, energized, or frustrated by AB5, please sign up for our email coalition and join our Facebook group where we will be coordinating specific, scaled action items to raise awareness and get our lawmakers' attention.