Now You Know: The Ongoing Effects of AB 5 on California's Martial Arts & Fitness Industry

Introduction:

Since its implementation in January 2020, California's Assembly Bill 5 (AB 5) has significantly impacted various industries, including martial arts and fitness. This legislation aimed to provide workers with more rights and benefits while imposing additional costs and responsibilities on employers. In this blog post, we'll explore the changes brought about by AB 5 from its inception to today and how they have impacted instructors and business owners in the martial arts and fitness industry.

AB 5: A Recap

AB 5 was designed to address the issue of worker misclassification, which occurs when businesses classify workers as independent contractors rather than employees. This classification often deprives workers of essential benefits and protections, such as minimum wage, overtime, and workers' compensation. AB 5 sought to rectify this by implementing the "ABC test," which determines a worker's status based on three criteria.

Impact on Instructors and Business Owners: The Initial Shift

Upon the implementation of AB 5, many martial arts and fitness instructors who previously operated as independent contractors found themselves reclassified as employees. This change had both pros and cons for instructors, with benefits such as minimum wage, overtime, and paid sick leave being offset by reduced flexibility and autonomy.

For business owners, the most significant challenge brought about by AB 5 was the increased cost associated with reclassifying instructors as employees. These costs include payroll taxes, workers' compensation insurance, and providing benefits such as paid sick leave and overtime.

The Ongoing Effects of AB 5

Over the past two years, the martial arts and fitness industry in California has continued to adapt to the changes brought about by AB 5. Some of the ongoing effects include:

1. Business Model Adjustments: Business owners have had to reevaluate their business models to account for the increased costs associated with employing instructors. This has led to changes in pricing structures, class offerings, and even the closure of some studios and gyms. What worked in the past doesn't work as it once did.
2. Legal Challenges: Several industries, including the fitness industry, have pursued legal challenges against AB 5, arguing that the law is too broad and unfairly targets certain professions. These challenges have resulted in some modifications to the law, but the overall impact on the martial arts and fitness industry remains largely unchanged.
3. The Gig Economy: The rise of the gig economy has also affected the martial arts and fitness industry, with some instructors opting to teach classes through online platforms or apps as independent contractors. This shift has provided an alternative for instructors who prefer the flexibility of independent contractor status.
4. COVID-19 Pandemic: The COVID-19 pandemic has further complicated the situation for the martial arts and fitness industry. With many gyms and studios forced to close temporarily or permanently, instructors and business owners have had to adapt to new ways of delivering classes, such as virtual sessions and outdoor workouts. The pandemic has also highlighted the importance of employee benefits, such as paid sick leave and health insurance, for those in the industry. While at the same time, AB 5 began at the beginning of 2020 then the shutdowns came shortly after. We are still working to adapt now to what "normal" business is in California.

Looking Ahead

As the martial arts and fitness industry in California continues to adapt to the changes brought about by AB 5, it's essential for instructors and business owners to stay informed of any legal developments and industry trends. By staying proactive and flexible, the martial arts and fitness community can continue to thrive in the face of ongoing challenges. As things level out after the shutdowns in California, there will be additional adaptations in business due to AB 5. Not to mention hyperinflation!

Conclusion

From its inception to today, AB 5 has had a profound impact on the martial arts and fitness industry in California. Both instructors and business owners have faced challenges in adapting to the new regulations, but they have also shown resilience and adaptability in the face of change. As the industry continues to evolve, it will be crucial for those in the martial arts and fitness community to stay informed and adapt as necessary to ensure their ongoing success.