At Madison Resources, we want to be seen as a true partner to your staffing firm. Therefore, we continuously strive to provide essential information, promote accuracy and efficiency, and offer helpful resources to support your success. In this spirit, we’re sharing details about the California Freelance Worker Protection Act, a new law that impacts contracts with freelance workers starting January 1, 2025.
New Legislation: The Freelance Worker Protection Act (SB 988)
On September 28, 2024, Governor Gavin Newsom signed SB 988 into law. Known as the Freelance Worker Protection Act (FWPA), this legislation imposes new minimum requirements on contracts between freelance workers and hiring parties. The law will go into effect on January 1, 2025, and is designed to provide freelance workers with essential labor protections, including timely payment.
The FWPA defines a freelance worker as an independent contractor who provides professional services through a contract valued at $250 or more. This threshold includes the total value of all services performed for a hiring party within a 120 day period. Hiring parties, in this context, are individuals or businesses operating in the state of California, excluding federal, state, local, or foreign governments, as well as individuals hiring for personal or household purposes.
The law uses the same definition of “professional services” as California’s AB 5, which covers a broad range of work including marketing, human resources, travel services, graphic design, grant writing, photography, videography, editing, translation, and freelance writing, among others.
What the Law Requires
The FWPA mandates that contracts between freelance workers and hiring parties must be in writing and must include specific terms. Each contract must identify the names and addresses of the hiring party and the freelance worker. It must contain a clear, itemized description of the services to be provided, the value of those services, the agreed upon rate, and the method of compensation. Additionally, the contract must specify either the payment due date or describe how the payment date will be determined. It must also include a date by which the freelancer is required to submit a summary of services rendered to ensure the hiring party can make timely payment.
A copy of this signed written agreement must be provided to the freelance worker, either electronically or in print. The hiring party is also required to retain a copy of the contract for a minimum of four years.
Payment Deadlines and Legal Consequences
The FWPA requires that freelance workers be paid on or before the date stated in the contract. If no specific payment date is outlined, then payment must be made no later than 30 days after the freelancer completes their services. Failure to adhere to these payment deadlines can result in significant penalties. If a freelance worker requested a written contract prior to starting the work and the hiring entity refused, the worker is entitled to an additional $1,000. If a hiring party fails to pay the agreed upon amount within the required timeframe, the freelance worker may recover up to twice the amount of unpaid compensation.
In situations where no written contract exists but the freelance worker reasonably believed a certain rate applied, compensation will be calculated based on that rate. If a violation of any provision of the law occurs, the freelance worker may be awarded damages equal to the value of the original contract or the value of the services provided whichever is greater.
What Staffing Firms Should Do Now
To comply with the FWPA, businesses must take several important steps. First, it is essential to identify any vendors or contractors who might fall under the new definition of a freelance worker. Then, existing agreements should be reviewed and revised to meet the law’s requirements, ensuring that all elements of the contract are properly documented and communicated.
In addition to contract updates, staffing firms should revise their internal policies to include anti discrimination and anti retaliation protections for freelance workers. It is also important to train hiring managers on how to properly implement and manage these new requirements. Most critically, businesses must ensure that all freelance workers are paid according to the terms of their contracts or, if no date is specified, within 30 days of completing the work.
Anti-Retaliation Measures
The FWPA explicitly prohibits hiring parties from discriminating against or penalizing a freelance worker who asserts their rights under the law. This includes opposing illegal practices, participating in legal proceedings, or seeking to enforce their protections under the FWPA. Any adverse action that is likely to deter a freelancer from exercising their rights is considered a violation of the law.
Final Thoughts
Because the FWPA applies to nearly all businesses in California that hire or retain independent contractors for professional services, it is critical for employers to take the time now to understand their obligations. Being proactive about contract compliance, timely payments, and internal education can help your staffing firm stay ahead of potential legal risks. Madison Resources is here to support your team through these legislative changes, offering insight and resources to help you remain compliant and confident moving forward.
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