New California Freelancer Law Takes Effect on January 1, 2025

On September 28, 2024, California Governor Gavin Newsom enacted SB 988, known as the Freelance Worker Protection Act (FWPA). The FWPA establishes baseline standards for contracts between freelance workers and private employers, entered into or renewed on or after January 1, 2025. Agencies are advised to examine this legislation and take necessary steps to ensure compliance, as a significant number of contractors may qualify as “freelance workers” under the provisions of the FWPA.

Per the statute, the FWPA defines a “freelance worker” as an individual or organization consisting of no more than one person, who is engaged as a bona fide independent contractor by a hiring entity to provide professional services in exchange for compensation of $250 or more. “Professional services” are those specified in California Labor Code Section 2778, which encompasses a range of services includes services such as marketing, human resources, travel agent services, graphic design, grant writing, fine artistry, photography, videography, photo editing, freelance writing, translating, editing, illustrating, among others. Agencies should review the FWPA to assess whether their contracted freelancers are subject to the FWPA utilizing thoughtful analysis and careful consideration.

Important requirements in the FWPA include:

• Contracts for freelance work of $250 or more (either from a single contract or when aggregating all contracts between the same hiring party and the independent contractor during the past 120 days). or more must be in writing and contain certain specific information regarding services to be provided and dates for contract completion, among other things.
  • The hiring party must provide the freelance worker with a signed copy of the written contract, either physically or electronically, and must retain the contract for at least four years.
  • Notably, FWPA stipulates that, even in the absence of a written agreement, the actions and communications of the parties involved may serve as evidence of a contract’s formation. For instance, discussions regarding service rates with the freelance worker or the completion of tasks expected from the worker can be considered as indicative of a contractual relationship, even if no formal written contract was established.
• Payment for freelance work must be made on or before the date compensation is due as specified under the contract or within thirty days after the completion of the work if no due date is specified in the contract.
• The FWPA prohibits discrimination or adverse action against freelance workers for protesting violations of the FWPA or seeking to enforce it.
• An aggrieved freelance worker may bring a civil action to enforce the FWPA and may be entitled to recover reasonable attorneys’ fees and costs, injunctive relief, and any other remedies deemed appropriate by the court. Specified damage include:
  • If the freelance worker requested a written contract prior to beginning work and the hiring entity refused, the freelance worker shall be awarded an additional $1,000.
  • if the hiring entity failed to pay the freelance worker the compensation they contracted for within the required timeframe, the freelance worker can recover up to twice the amount that was unpaid when payment was due.
  • If the freelance worker requested a written contract before beginning work and the hiring entity refused to provide one, the amount unpaid will be determined by the rate that the freelance worker reasonably understood to apply to the work.
  • If the hiring entity violates any provision of this law, the freelance worker can be awarded damages equal to the value of the contract or the value of the work performed, whichever is greater.

To prepare for compliance with the law, agencies working with CA freelancers should identify any vendors that may be classified as “freelance workers” under the FWPA and perform necessary vendor/contractor agreement review to ensure required language is in place. Any existing anti-discrimination and retaliation policies should be updated to include protection for freelance workers; hiring managers who manage contractors should be trained regarding new requirements of the FWPA. Agency finance teams should be made aware of strict payment terms requirements and pay freelancers within specified contract terms or within 30 days of the completion of freelance work.

Worth noting, FWPA provides similar protections to freelancers as those provided by the Los Angeles Freelance Worker Protections Ordinance, which took effect in July 2023.

With this new freelancer law, California joins Illinois, New York state, New York City, Los Angeles, Minneapolis, Seattle and Columbus, Ohio, in imposing specific requirements for engagements with freelance independent contractors.

In 2019, California enacted AB 5 to regulate companies that hire independent contractors, radically changing 30 years of worker classification and reclassifying millions as employees. The law requires companies to use the ABC test to determine if a worker is an employee or an independent contractor, and presumes workers are employees unless the company can prove otherwise. AB 2257 served as clean-up legislation to AB 5, and amends certain exceptions to the “ABC” test set forth in AB 5. Importantly,  FWPA does not change the test for determining whether a worker is an employee or an independent contractor, but the topics are related.

Federal regulations also exist regarding employee classification for freelancers. Agencies who are concerned about high misclassification risk due to increasing scrutiny by regulators over independent contractor (IC) classification may consider transitioning former IC workers to employee status (such as to a part time W-2, non-benefit employee). Agencies that reserve the right to control certain aspects of the work done by freelancers— even if they don’t actually exercise that control — could be found to have an employee relationship with the freelancer. More information on federal independent contractor regulations can be found here.

Have questions about California’s Freelance Worker Protection Act or independent contractor classification issues? Please contact Amanda Anderson, 4As VP of Government Relations.