Am. Soc'y of Journalists & Authors, Inc. v. Bonta

15 F.4th 954

AMERICAN SOCIETY OF JOURNALISTS AND AUTHORS, INC.; National Press Photographers Association, Plaintiffs-Appellants,

v.Rob BONTA ^* , Attorney General of the State of California, Defendant-Appellee.

No. 20-55734

United States Court of Appeals, Ninth Circuit.

Argued and Submitted June 11, 2021 Pasadena, California

Filed October 6, 2021

James M. Manley (argued), Caleb R. Trotter, and Jeremy Talcott, Pacific Legal Foundation, Sacramento, California, for Plaintiffs-Appellants.

Jose A. Zelidon-Zepeda (argued), Deputy Attorney General; Heather Hoesterey, Supervising Deputy Attorney General; Thomas S. Patterson, Senior Assistant Attorney General; Office of the Attorney General, San Francisco, California; for Defendant-Appellee.

Ilya Shapiro and Trevor Burns, Cato Institute, Washington, D.C.; Manuel S. Klausner, Law Offices of Manuel S. Klausner, Los Angeles, California; for Amici Curiae Cato Institute, Reason Foundation, and Individual Rights Foundation.

Timothy Sandefur and Christina Sandefur, Scharf-Norton Center for Constitutional Litigation at the Goldwater Institute, Phoenix, Arizona, for Amicus Curiae The Goldwater Institute.

Krystal B. Swendsboe and Hyok Frank Chang, Wiley Rein LLP, Washington, D.C., for Amicus Curiae The Independent Institute.

Daniel R. Suhr and Reilly Stephens, Liberty Justice Center, Chicago, Illinois, for Amicus Curiae Liberty Justice Center.

Before: Consuelo M. Callahan and Danielle J. Forrest, Circuit Judges, and Richard Seeborg,^** District Judge.

CALLAHAN, Circuit Judge:

To confront the misclassification of employees as independent contractors, California passed Assembly Bill (AB) 5, then AB 2257, which codified a more expansive test for determining workers’ statuses, albeit with certain occupational exemptions. Because freelance writers, photographers, and others received a narrower exemption than was offered to certain other professionals, the American Society of Journalists and Authors, Inc., and the National Press Photographers Association (collectively, ASJA) sued, alleging violations of the First Amendment and Equal Protection Clause. We conclude, however, that the laws do not regulate speech but, rather, economic activity. We further conclude that the legislature's occupational distinctions are rationally related to a legitimate state purpose. We therefore affirm the district court's dismissal of ASJA's suit.

I.

The California Supreme Court dramatically altered state labor law in Dynamex Operations West, Inc. v. Superior Court of Los Angeles , 4 Cal.5th 903, 232 Cal.Rptr.3d 1, 416 P.3d 1 (2018), by adopting the "ABC test" for ascertaining whether workers were employees or independent contractors. That test permits businesses to classify workers as independent contractors only if they (a) are "free from the control and direction of the hirer," (b) perform work "that is outside the usual course of the hiring entity's business," and (c) are "customarily engaged in an independently established trade, occupation, or business." Id. , 232 Cal.Rptr.3d 1, 416 P.3d at 34. If a business cannot make that showing, its workers are deemed employees, in which case the business must comply with certain requirements—"paying federal Social Security and payroll taxes, unemployment insurance taxes and state employment taxes, providing worker's compensation insurance, and ... complying with numerous state and federal statutes and regulations governing the wages, hours, and working conditions of employees." Id. , 232 Cal.Rptr.3d 1, 416 P.3d at 5.

Before Dynamex , California courts applied the multi-factor test established in S.G. Borello & Sons, Inc. v. Department of Industrial Relations , 48 Cal.3d 341, 256 Cal.Rptr. 543, 769 P.2d 399 (1989). Under Borello , a worker's status turned primarily on the hiring entity's right to control the worker. Id. , 256 Cal.Rptr. 543, 769 P.2d at 403–04. But courts also looked to several "secondary indicia" of employment, including the hiring entity's right to discharge workers at will, the length of the workers’ services, and whether the work was part of the hiring entity's regular business.¹ Id. , 256 Cal.Rptr. 543, 769 P.2d at 404. Importantly, no factor was dispositive; courts engaged in a case-by-case evaluation of the arrangement at issue. Id. , 256 Cal.Rptr. 543, 769 P.2d at 407. This flexibility gave the California Supreme Court pause. Concerned that the Borello standard caused confusion and enabled businesses to evade labor requirements, the Dynamex court adopted the more rigid ABC test. 232 Cal.Rptr.3d 1, 416 P.3d at 33–34.

Although Dynamex was initially limited to wage orders,² with Borello applying outside that context, the California legislature codified the ABC test and expanded its applicability through the enactment of AB 5. The legislature gave several reasons for taking this step. It found that misclassification caused workers to "lose significant workplace protections," deprived the state of needed revenue, and ultimately contributed to the "erosion of the middle class and the rise in income inequality." AB 5, Ch. 296, 2019–2020 Reg. Sess. (Cal. 2019). With AB 5, the legislature declared, it was protecting "potentially several million workers." Id.

AB 5 did not apply Dynamex across the board, however, but specified that the Borello standard would continue governing many occupations and industries. See generally Cal. Lab. Code § 2750.3. For example, the law exempted from the ABC test licensed doctors, lawyers, architects, engineers, and accountants, as well as certain commercial fishermen, salesmen, and investment advisers, among many others. Id. § 2750.3(b)(2)–(6). It also exempted those engaged in enumerated "professional services," which were defined to include marketing, graphic design, grant writing, barbery, cosmetology, and fine art. Id. § 2750.3(c)(2)(B)(i), (iv)–(vi), (xi).

At issue here are AB 5's "professional service" exemptions for freelance workers, including freelance writers and photographers. Id. § 2750.3(c)(2)(B)(ix)–(x). As originally enacted, AB 5 limited this exemption to freelancers who submitted fewer than thirty-five pieces of work to a single entity in a given year. Id. If a freelancer stayed within that limit, Borello governed. If he exceeded it, Dynamex instead applied. AB 5 also provided that the exemption did not apply to photographers, photojournalists, and videographers working on "motion pictures"—i.e. , "projects produced for theatrical, television, internet streaming for any device, commercial productions, broadcast news, music videos, and live shows." Id. § 2750.3(c)(2)(B)(ix). Dynamex governed their arrangements no matter the situation.

ASJA sued to enjoin the above limitations and thereby expand the freelance exemptions. In ASJA's view, the submission limit and exclusion of "motion picture" workers offended the Free Speech, Free Press, and Equal Protection Clauses because they did not apply to other professionals, such as marketers and artists, who enjoyed broader, or at least differently contoured, exemptions from Dynamex ’s ABC test. The restrictions burdened journalism, ASJA claimed, by forcing freelancers to become employees, thereby reducing their work opportunities and inhibiting their "freedom to freelance."

ASJA moved for a preliminary injunction and for a temporary restraining order. The court denied the restraining-order request and, after concluding that ASJA was unlikely to prevail, declined to issue a preliminary injunction. It rejected ASJA's First Amendment argument, finding that AB 5 regulated economic conduct, not speech, and that the law evinced no content preference. The court also held that AB 5 survived ASJA's Equal Protection challenge because the regulated occupations were not similarly situated and, even if they were, there was a rational basis for the legislature's occupational classifications.

ASJA appealed the district court's order, and California moved for dismissal of the underlying action. The court dismissed the suit for the same reasons that it denied the preliminary injunction, and ASJA appealed that order, too. We then dismissed ASJA's first appeal, holding that the denial of the preliminary injunction "merged" into the final judgment. No. 20-55408, Dkt. No. 32 (9th Cir. Aug. 20, 2020).

In the meantime, the California legislature amended AB 5 with AB 2257, which added new "professional service" exemptions and clarified existing ones.³ See Cal. Lab. Code § 2778. As relevant here, AB 2257 dropped the thirty-five-submissions limit but bounded the freelance exemptions in other ways. Now, for Borello to apply, freelance workers cannot "directly replac[e] an employee who performed the same work at the same volume for the hiring entity," "primarily perform the work at the hiring entity's business location," or be "restricted from working for more than one hiring entity."⁴ Id. § 2778(b)(2)(I)–(J). The law remained largely the same in other respects. Thus, notwithstanding AB 2257's changes, ASJA maintains that the law, now codified at section 2778 of California's Labor Code, continues to violate the First Amendment and Equal Protection Clause.⁵

II.

Because the district court dismissed AJSA's suit while its appeal of the preliminary-injunction order was pending, the orders merged. See Nationwide Biweekly Admin., Inc. v. Owen , 873 F.3d 716, 730–31 (9th Cir. 2017) (describing the merger doctrine); accord SEC v. Mt. Vernon Mem. Park , 664 F.2d 1358, 1361–62 (9th Cir. 1982). We thus begin—and ultimately end—with the dismissal order, which we review de novo. Butterfield v. Bail , 120 F.3d 1023, 1024 (9th Cir. 1997).

III.

A.

The First Amendment, applied to states through the Fourteenth Amendment, prohibits laws that abridge the freedom of speech or the press. U.S. Const. amend. I. Governments cannot, therefore, "restrict expression because of its message, its ideas, its subject matter, or its content." Reed v. Town of Gilbert , 576 U.S. 155, 163, 135 S.Ct. 2218, 192 L.Ed.2d 236 (2015) (quoting ...