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On September 28th, Governor Gavin Newsom signed into law SB 988, which will impose minimum requirements on contracts between freelance workers and hiring parties, effective January 1, 2025. The new state law, known as the “Freelance Worker Protection Act” (FWPA), aims to give freelancers “basic worker protections” and the right to be paid on time.
Freelance workers are defined as independent contractors who provide professional services under a contract for at least $250, under the FWPA. The $250 threshold includes all contract services between a freelance worker and a hiring entity within the last 120 days.
Hiring parties are defined as a person or organization in the State of California that retains a freelance worker to provide professional services (other than federal, state, local, or foreign governments or individuals hiring services for the benefit of themselves, their family members, or their homestead).
Professional services has the same meaning as that provided under AB 5 (California’s landmark independent contractor law), which 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, and others.
What does this mean for you?
The contract between a freelance worker and business will determine when the worker must be paid, under the bill. Contracts must include the date that the hiring party will pay the compensation to the freelance worker, or at least the way in which that date will be determined.
The FWPA requires a hiring party to provide a signed copy of a written contract (either physically or electronically) to the freelance worker and keep a copy of the contract for at least four years. The written contract must include, at minimum, the following information:
- The name and address of each party
- An itemized list of all services that will be provided, including the value of those services and the rate and method of compensation
- The date the hiring party will pay the compensation or how the date will be determined
- The date by which the freelance worker will submit a list of services rendered under the contract to the hiring party to meet the hiring party’s internal deadlines for timely payment of compensation
Written contracts are key for hiring parties to protect themselves in case of disputes over services or payment. The FWPA provides that even when a written contract is not provided, the parties’ actions and communications can be evidence that a contract was formed.
The FWPA requires covered freelance workers to be paid:
- On or before the date compensation is due as specified under the contract
- If the contract does not specify a payment date, no later than 30 days after the freelance worker completes the services under the contract
A freelance worker may bring a lawsuit to enforce the law and recover the following:
- 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 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 work performed, whichever is greater.
Given the FWPA will apply to almost all employers that hire or retain independent contractors for professional services, it is crucial for businesses to understand their obligations under the new law. Below are five steps that you can take to comply:
- Identify any vendors that may be classified as “freelance workers” under the FWPA.
- Review existing vendor and contractor agreements to ensure they comply with the new requirements and provide updated contracts as needed.
- Update any existing anti-discrimination and retaliation policies to include protection for freelance workers.
- Train your hiring managers on how to comply with the new requirements.
- Timely pay freelance workers in accordance with the contract or, if no payment date was specified, within 30 days of the freelance worker completing the services under the contract.
Under the FWPA, a hiring party may not discriminate or take any adverse action against a freelance worker that penalizes the freelance worker for, or is reasonably likely to deter a freelance worker from doing any of the following:
- Opposing any practice that is prohibited by the FWPA
- Participating in any proceedings related to enforcement of the FWPA
- Seeking to enforce any rights provided to them under the FWPA
- Otherwise asserting or attempting to assert rights provided under the FWPA
As always, we recommend speaking with your attorney, CPA, or industry professional for further guidance.
For more information:
To read Senate Bill No. 988:
https://leginfo.legislature.ca.gov/faces/billTextClient.xhtml?bill_id=202320240SB988
Contact Information:
To contact Governor Gavin Newsom’s office:
Email: https://www.gov.ca.gov/contact/
Phone: 916-445-2841
Address: 1021 O Street, Suite 9000
Sacramento, CA 95814
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