Freelancer in California: what AB5 means for your contracts right now
The Law That Rewrote Freelance Work in California
When California passed Assembly Bill 5 (AB5) in 2019, it became one of the most significant pieces of labor legislation affecting freelancers in U.S. history. The law established a new default classification test for workers — one that made it substantially harder for companies to classify workers as independent contractors rather than employees.
Five years on, AB5 continues to reshape freelance contracts in California. Many freelancers don't fully understand how it affects them — and some are operating under contracts that either violate the law or fail to protect the freelancer's rights under it.
The ABC Test: How Worker Classification Works Under AB5
AB5 codified the 'ABC test' for determining whether a worker is an employee or an independent contractor. A company can only classify a worker as an independent contractor if all three of the following are true:
A — Control: The worker is free from the control and direction of the hiring company in the performance of their work, both under the contract and in practice.
B — Outside the usual course of business: The work performed is outside the usual course of the hiring company's business. A graphic designer hired by a design agency fails this test. A graphic designer hired by a restaurant to design a menu may pass it.
C — Customarily engaged: The worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed.
If a company cannot satisfy all three prongs, the worker is legally an employee — regardless of what the contract says.
Who Is Exempt from AB5
AB5 includes dozens of professional exemptions negotiated into the law. Key ones relevant to freelancers include:
Business-to-business exemption: If you operate as a legitimately established business entity (LLC, sole proprietorship with a business license), contract directly, set your own rates, and work for multiple clients, you may qualify for the B2B exemption — which applies the more lenient Borello test rather than the ABC test.
Professional services exemption: Workers in specific categories — including marketing, HR administration, travel agents, graphic designers, grant writers, fine artists, and certain other licensed professionals — may qualify for exemption if they meet additional criteria including: setting their own hours, having multiple clients, maintaining a business location, and having a contract specifying payment rate and ownership of work product.
Freelance writers, photographers, and videographers: These workers were partially exempted but with a 35-submissions-per-outlet annual cap — meaning a single outlet cannot use more than 35 pieces from the same freelancer per year without the relationship potentially being reclassified.
What This Means for Your Freelance Contracts
If you are a California freelancer, AB5 affects your contracts in three concrete ways:
Your contract cannot override the classification law
A contract that says 'you are an independent contractor' does not make you one under California law if the ABC test isn't met. Classification is determined by the actual nature of the working relationship, not by what a document says. If you have been classified as a contractor but your working relationship looks like employment — fixed hours, single client, work integral to their core business — you may have employee rights regardless of your contract.
The professional services exemption requires specific contract language
To qualify for the professional services exemption, AB5 requires that the written contract specifies the rate of payment, that you maintain the right to set your own hours, that you have multiple clients, and that the contract specifies who owns the work product. If your current contracts don't include these elements explicitly, you may not be able to claim the exemption — which has implications for your client's obligations and your own protections.
The Freelance Worker Protection Act (effective 2025)
California's Freelance Worker Protection Act, which took effect January 1, 2025, adds additional contract requirements for freelance engagements worth $250 or more. Clients are now required to provide a written contract specifying the scope of work, the rate and method of payment, and the payment date. Failure to provide a written contract is a violation of the law — and freelancers can pursue penalties against clients who don't comply.
Dealing with a contract dispute right now? Unstuck (Unstuck ) reads your contract from your side — flags what's enforceable, what isn't, and gives you ready-to-send responses. No lawyer needed.
A Real-World Example: When Classification Matters
Sofia is a UX researcher in San Francisco. For 18 months, she worked exclusively for a single tech company, on-site two days a week, under their direction, on their core product. She was classified as an independent contractor and invoiced monthly.
She uploaded her contract to Unstuck after the engagement ended and she found herself unable to claim unemployment benefits. The analysis flagged that her working arrangement — single client, on-site work, direction from company management, work integral to the company's core product — failed prong A and prong B of the ABC test. As a misclassified employee, she had potential claims for unpaid employment taxes, denied benefits, and other protections.
Understanding this didn't undo the past engagement, but it informed her next contract negotiation — and her decision to formally establish an LLC and diversify her client base to qualify for the B2B exemption going forward.
Practical Steps for California Freelancers in 2025
Audit your current contracts against the ABC test and the professional services exemption criteria. If you rely on the exemption, make sure your contracts explicitly include the required elements.
Ensure every engagement worth $250+ has a written contract — this is now a legal requirement under the Freelance Worker Protection Act, and the obligation falls on the client. If a client doesn't provide one, request it in writing.
If you are working exclusively for a single client on work central to their business, understand your classification risk. You may have employee rights you are not being given.
If you operate as an LLC or formal business entity with multiple clients, document this clearly — your B2B exemption status depends on it being real, not just nominal.
The Bottom Line
AB5 did not make freelancing illegal in California — that was a common misconception at the time of passage. What it did was impose real legal standards on how freelancers are classified and contracted. For freelancers who understand those standards, the law provides meaningful protections. For those who don't, it can create invisible vulnerabilities in contracts that look fine on the surface.
Dealing with a contract dispute right now? Unstuck (Unstuck ) reads your contract from your side — flags what's enforceable, what isn't, and gives you ready-to-send responses. No lawyer needed.