Overview of the New Law
In a move echoing legislative efforts across various states, California Governor Gavin Newsom has signed Senate Bill 988, known as the Freelance Worker Protection Act (FWPA), into law as of September 28, 2024. This statute aims to bolster protections for freelance workers, formally known as independent contractors. Codified at California Business & Professions Code Section 18100 et seq., the FWPA places specific obligations on individuals and entities engaging freelance workers for designated “professional services.” Businesses must acquaint themselves with these new regulations, understand their implications, and anticipate potential compliance challenges.
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Key Provisions of the FWPA
Written Contracts
The FWPA mandates that freelance engagements for professional services valued at $250 or more require a written contract. Essential elements of such a contract include:
- The names and mailing addresses of all parties involved.
- An itemized description of the services to be provided, including monetary value and the method of payment.
- The payment deadline or the mechanism for determining it if not explicitly stated.
- A requirement for the freelance worker to submit an invoice or list of services rendered by a set date to facilitate timely payment.
Record Keeping
Hiring parties must retain records of freelance contracts for at least four years to comply with the FWPA's documentation requirements.
Timely Payments
Payments must be made on or before the specified date in the contract. If no payment date is stipulated, full compensation is required within 30 days of the project's completion. Freelance workers cannot be pressured into accepting reduced payment as a condition for on-time compensation.
Anti-Retaliation Measures
The act bars any retaliatory actions against freelance workers who exercise their rights under the FWPA, ensuring they are not discriminated against or penalized for asserting their legal protections.
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Definition of a ‘Freelance Worker’
The FWPA defines a freelance worker as:
- An individual or sole proprietorship with no more than one person.
- Hired as an independent contractor.
- Providing professional services.
- Receiving $250 or more for services rendered in a 120-day period.
Effectively, the law includes any independent contractor hired for professional services meeting the outlined criteria.
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Who Must Comply?
The FWPA's broad definition of a “hiring party” includes all individuals and companies within California, regardless of size. Sole proprietorships, LLCs, corporations, and other entities must comply if they engage freelancers for professional services. The only exceptions are federal, state, and local governments, as well as individuals hiring for personal or family use.
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Additional Considerations
The FWPA introduces administrative obligations, such as ensuring contracts meet statutory requirements and implementing a record-keeping system. Businesses should:
- Identify which contractors provide services that fall under FWPA criteria.
- Review and update existing contracts to include all mandated elements.
- Consult legal professionals to customize contracts that address unique business needs and remain compliant with the new law.
Note that the FWPA prohibits waiver of its provisions. Attempts to circumvent these requirements will be considered void and unenforceable. Violations can result in legal action brought by freelance workers or public prosecutors, with potential penalties including attorney fees, damages, and injunctive relief.
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Effective Date
The FWPA will take effect on January 1, 2025, and will not be applied retroactively.
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