California Travel Agents Protected As ICs After Getting Exemption In Latest Version of AB5

Travel advisors were added late last week to the list of exempted professions in the latest version of a California Assembly Bill (A.B.5), a bill that seeks to regulate independent contractors operating in the state.

The amendment inserted into the bill Friday, Aug. 30 would add travel agencies regulated by the state's Seller of Travel law to the list of "Professional Services" exempted from the bill's impacts. Prior to the amendment, California lawmakers had carved out exemptions for a variety of professions, including, lawyers, architects, insurance agents, investment advisers, and even hairstylists/barbers.

Late on Friday, A.B. 5 advanced out of the Senate Appropriations Committee and now heads to a vote before the full Senate, which has until Sept. 13 to pass the bill. Additional changes might be made to A.B.5.

The bill, which originated in the office of Assembly Member Lorena Gonzalez, would then proceed to the office of Governor Gavin Newsom for his signature or a veto. That would happen before mid-October. If the bill does not pass the full Senate, the legislature would be free to take it up again in 2020.

“We are very pleased that Assembly Member Gonzalez and the California Labor Federation have reviewed the specific situation for California sellers of travel and have decided to add this provision to A.B. 5,” said Diane Embree, president of the California Coalition of Travel Organizations [CCTO].

Embree told Travel Market Report that the exemption was touch and go literally up until the appropriations committee hearing, calling it “the result of hard and dogged work on the part of many people. It was never close to being a done deal.”

“Even up until the end it was one of those situations where you just can’t get a clear read on it,” Embree said. “We would have meetings that left us feeling hopeful, only to have nothing come of those meetings. Two days before the announcement of the amendment, we had a lobbying day in Sacramento with over 70 ICs and agency owners, meeting with their legislators. Some of the responses were positive but others caused concern.”

More than 230 people participated in the coalition’s Aug. 6 and Aug. 28 joint ASTA-CCTO Days of Action, and 2,753 Californians called or emailed their legislators through ASTA’s grassroots advocacy portal.

Eben Peck, executive vice president for advocacy at the American Society of Travel Advisors [ASTA], called the exemption “a tremendous victory for our industry. We commend Assembly Member Gonzalez for her decision to include it and to the many ASTA and CCTO members who put in so much work over the past few months to make this day a reality."

Regulations spelled out
After much lobbying and coordination with a broad coalition of travel industry associations and commercial organizations, Gonzalez and the Labor Federation drafted a provision to A.B. 5 to ensure that the determination of an individual’s status as either an employee or an independent contractor would be based on something called the “Borello” criteria.

To be exempted, agents must prove the following:

(A) The individual maintains a business location, which may include the individual's residence, that is separate from the hiring entity.

(B) If work is performed more than six months after the effective date of this section, the individual has a business license, in addition to any required professional licenses or permits for the individual to practice in their profession.

(C) The individual has the ability to set or negotiate their own rates for the services performed.

(D) Outside of project completion dates and reasonable business hours, the individual has the ability to set the individual's own hours.

(E) The individual is customarily engaged in the same type of work performed under the contract with another hiring entity or holds themselves out to other potential customers as available to perform the same type of work.

(F) The individual customarily and regularly exercises discretion and independent judgment in the performance of the services.

Additionally, to be covered as an "individual" under these criteria, the business must provide services through a sole proprietorship or other business entity and be regulated by the state’s Attorney General under California’s Business and Professions Code. 

“I am convinced that our strategy of focusing on the California Seller of Travel law really paid off. Other professions that had received early exemptions were almost entirely professions that had licensing,” Embree said.

“Though the travel industry doesn’t have licensing, in California we are regulated by the Attorney General under the Seller of Travel law. By bringing that law to the attention of the legislators and the California Labor Federation, which is the sponsor of AB 5, that played a very big role in getting us our exemption.”

Previously, A.B.5 was based on the California Supreme Court’s 2018 “Dynamex” decision, which states that to declare a worker an IC, a business must prove that the worker: 1) is free from company control; 2) performs work not central to the company’s business; and 3) has an independent business in their industry. All three of these conditions must be met to classify the worker as an IC.

“Even before AB 5 was introduced, CCTO was meeting with legislators to bring to their attention the devastating effects that the Dynamex decision could have on the travel profession and to ask their help in preventing the loss of livelihoods for thousands and thousands of travel advisors,” she told Travel Market Report.

Independent agents not entirely in the clear
While the exemption is a major victory, there are some provisions of the amendment “that may require modest changes to current business practices,” ASTA noted. These include that an independent contractor (IC) must "maintain a business location, which may include the individual's residence, that is separate from the hiring entity" and must be "customarily engaged in the same type of work performed under the contract with another hiring entity" or must "hold themselves out to other potential customers as available to perform the same type of work."

Further, to be covered under the pre-Dynamex standard, the IC must be in compliance with the California Seller of Travel law, either by registering or qualifying for the exemption from the registration requirement, ASTA said.

“We'll be watching closely and engaging wherever necessary, but getting to this point is a huge win for ASTA and our members,” ASTA said in a note to members late last week.

A number of associations and commercial entities descended on California the last few months to articulate the case for independent travel agents, including ASTA national officials, the CCTO, California ASTA chapters, as well as the United States Tour Operators Association, Ensemble Travel Group, Professional Association of Travel Hosts, Signature Travel Network, the Student Youth Travel Association, Travel Leaders Network, Uniglobe Travel Center, Virtuoso, and WESTA.

“CCTO has a terrific board of directors who worked very hard. Some of them dropped everything, at the last minute, to testify at committee hearings,” Embree said. “CCTO and National ASTA developed a partnership and the two organizations worked incredibly well together to coordinate lobbying efforts and to brainstorm about strategies.”

ASTA also thanked a group of suppliers, including AmaWaterways, Carnival Corporation, Princess Cruises, Royal Caribbean/Azamara/Celebrity Cruises, Special Needs Group and The Travel Corporation.