Fresh off California win, industry readies for more IC battles

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Independent contractor
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California Gov. Gavin Newsom has signed Assembly Bill 5 (AB 5), the bill that changes the test used to determine employee classification, into law. While the travel industry was successful in carving out an exemption for advisors so agencies can use the same classification test that has been in use for decades, the issue is likely to spread to other states.

ASTA is already gearing up to fight similar proposals using tactics the Society developed in California alongside the California Coalition of Travel Organizations (CCTO). 

Meanwhile, with the passage of AB 5, lawyers are urging travel agencies to review the contracts they have in place with independent contractors (ICs) to ensure they pass muster. 

Even in California, where the law goes into effect in January, advocacy groups aren't quite done with their work.

The victory "was very exciting," said CCTO president Diane Embree, who's also an IC with Michael's Travel Centre in Westlake Village, Calif. "I'm trying to temper the excitement a little bit because we know that come January, there are going to be a rash of bills trying to exempt not only the Lyfts and Ubers but other professions as well. And there could be bills looking to amend this new law.

"So our concern would be that if something is done to amend the law, will it have any kind of impact on the professions that are already protected by the law?"

She said she believes agencies were granted an exemption at least in part because there's a seller of travel law in California. Most exempt industries were those requiring professional licensing. While the seller of travel law is not a professional license, it still represents a registry of advisors overseen by the state's attorney general.

Embree was on the CCTO board in the 1990s, when the seller of travel law was introduced. The coalition supported it, as it replaced the unenforced travel promoter law. That law had more stringent bonding and ticket-delivery requirements with which advisors would not have been able to comply.

"Certainly, way back then, we never would have dreamed of the impact it would have almost 30 years later," Embree said.

Eben Peck, executive vice president of advocacy at ASTA, said the Society started preparing for more state-level fights in places like New York, Oregon and Washington state shortly after getting the exemption in California. The Society feels more prepared, he said, because it has a "playbook" ready thanks to its efforts in California.

Agencies that work with ICs in California are advised to pay attention to ensure that they meet the requirements for the exemption carved out for them, but lawyers who specialize in the industry are urging everyone to review IC contracts and make sure they comply with applicable laws.

Employment lawyer Sue Bendavid with the firm Lewitt Hackman said, "Smart companies are the ones that keep their fingers on the pulse ... and always pay attention to the laws that are changing. And they have to change when those laws change."

In California, specifically, the exemption for travel advisors comes under the overarching "professional services" exemption, Bendavid said. In order to qualify for that exemption, a number of criteria are outlined in the bill. For example, an IC must secure a business license within six months of the law becoming effective and have the ability to set his or her own hours. Additionally, it dictates that a travel advisor must satisfy California's seller of travel law.

If all the provisions are met, the agent in question would qualify for the exemption, meaning the Borello standard would be used to determine worker status instead of the newer ABC test required by the law. The Borello standard has been used in California for decades.

Peter Lobasso, the Society's general counsel, said two criteria outlined in the professional services exemption might mean changes to current practices: the requirement that the worker have his or her own business location (which can be a home); and that "the individual is customarily engaged in the same type of work performed under contract with another hiring entity or holds themselves out to other potential customers as available to perform the same type of work."

Lobasso interprets the latter requirement as meaning a worker can work or is actively working with another entity. In travel, that means that if a host agency has an exclusivity clause in an IC's contract, it would have to be removed for the IC to qualify for the exemption.

Robert Joselyn, president and CEO of the Joselyn Consulting Group, said there is a case to be made for professional licensing of travel advisors. It could help protect them from future legislation like that in California, he said, and would elevate the industry and the profession.

Joselyn recently wrote an argument for licensing and distributed it throughout the industry. In it, he said he understood arguments against professional licensing.

"Wouldn't it be nice though," Joselyn wrote, "if 10 years from now, advisors were viewed with the same respect as attorneys, CPAs, certified financial advisors, etc.?"

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