Are You Ready for California’s Freelance Worker Protection Act?

On January 1, 2025, California’s Freelance Worker Protection Act (FWPA) (Senate Bill 988—California Business and Professions Code § 18100, et seq.) will take effect, imposing strict requirements on businesses that hire freelance workers. Signed into law by Governor Gavin Newsom on September 28, 2024, the FWPA establishes a detailed framework for hiring freelancers, including mandatory written contracts, timely payment rules, and significant penalties for noncompliance.

If you’re a hiring party that relies on freelancers, failing to comply with this new law could expose your business to costly lawsuits, financial penalties, and reputational damage. Here’s what you need to know about the FWPA and how to prepare.

Who Does the FWPA Cover?

The FWPA applies broadly to most businesses and individuals hiring freelancers in California, but not every engagement falls under its scope. Understanding whether the FWPA applies to your business relationships is the first step toward compliance.

• Freelance Workers: The FWPA defines a freelancer (§18101(a)) as an individual or one-person organization (incorporated or unincorporated) hired to provide professional services. The law applies when the total value of the services is $250 or more, either under a single contract or aggregated across all contracts with the same hiring party within a 120-day period.
• Hiring Parties: A hiring party (§18101(b)) is any individual or organization in California retaining a freelancer for professional services. However, there are notable exceptions: the United States government, California state and local governments, foreign governments, and individuals hiring for personal benefit (e.g., household services) are not subject to the law.

NOTE: Professional Services: As defined in §18101(c), these include roles such as graphic design, writing, photography, and marketing, consistent with Labor Code §2778(b)(2).

Written Contracts: A Non-Negotiable Requirement

One of the central tenets of the FWPA is the mandatory written contract for freelance work valued at $250 or more (§18103(a)). This is not merely a best practice but a legal obligation under the new law, and failure to comply can lead to significant penalties.

A compliant contract must include (§18103(b)):

1. The names and mailing addresses of both parties.
2. An itemized list of services the freelancer will provide, including their value, the rate, and method of compensation.
3. The payment due date or the method for determining when payment is due.
4. The deadline for submitting service records (e.g., invoices) to facilitate timely payment.

Hiring parties must provide a signed copy of the contract to the freelancer, either physically or electronically, and retain it for at least four years (§18103(a)).

What happens if there’s no written contract? Section 18103(c) permits freelancers to rely on communications such as emails or text messages to prove the existence of an agreement, increasing the risk of disputes over terms and compensation.

Payment Rules: Timeliness Is Key

The FWPA imposes strict payment deadlines to ensure freelancers are compensated promptly (§18102). Under the law:

• Payments must be made by the date specified in the contract (§18102(a)(1)).
• If no payment date is specified, the freelancer must be paid within 30 days of completing the services (§18102(a)(2)).

The law also prohibits hiring parties from pressuring freelancers to accept reduced compensation or provide additional services beyond the terms of the contract as a condition of receiving payment (§18102(b)).

Noncompliance comes at a steep price. Late or incomplete payments can result in damages of up to twice the unpaid amount, plus the freelancer’s legal fees if the matter escalates to court (§18106(b)(2)).

Enforcement and Penalties: What’s at Stake?

Freelancers have strong enforcement mechanisms under the FWPA. Section 18106(a) allows freelancers or public prosecutors to file civil actions for violations, creating significant financial risks for noncompliant businesses.

Potential penalties for hiring parties include:

• $1,000 for refusing to provide a written contract when requested (§18106(b)(1)).
• Up to twice the unpaid compensation for missed or late payments (§18106(b)(2)).
• Damages equal to the value of the contract or the work performed for other violations (§18106(b)(3)).

Courts may also award freelancers attorney’s fees, court costs, and injunctive relief (§18106(b)).

Retaliation Is Prohibited

The FWPA includes robust anti-retaliation protections, creating another area of potential liability for hiring parties. Section 18105 prohibits businesses from taking adverse actions against freelancers who:

• Oppose violations of the FWPA.
• Participate in enforcement proceedings or lawsuits related to the FWPA.
• Assert their rights under the law.

These protections significantly reduce a hiring party’s ability to negotiate disputes outside the legal framework, emphasizing the importance of compliance from the outset.

Waivers Are Not an Option

A key provision of the FWPA is that waivers of the law’s protections are void and unenforceable (§18104). This means businesses cannot contractually sidestep their obligations under the FWPA, even if a freelancer agrees to less favorable terms.

What Should Businesses Do Now?

With January 1, 2025, fast approaching, hiring parties must act quickly to mitigate compliance risks. Here are the critical steps to take:

1. Review Your Freelancer Relationships: Identify any existing or potential contracts that fall under the FWPA’s scope.
2. Update Your Contracts: Create standardized contract templates that include all the required elements. Ensure these templates are reviewed by legal counsel.
3. Streamline Payment Processes: Establish internal systems to ensure freelancers are paid on time and in accordance with their contracts.
4. Train Your Team: Educate managers and HR personnel on FWPA requirements, including the importance of written contracts and anti-retaliation policies.
5. Retain Documentation: Implement systems to store contracts and related communications for at least four years.

The Bottom Line

The Freelance Worker Protection Act represents a significant compliance challenge for businesses operating in California. Noncompliance exposes hiring parties to steep financial penalties, legal disputes, and reputational damage.

Businesses that rely on freelancers should take proactive steps now to align their practices with the FWPA. Ignoring this law or delaying preparation could result in costly consequences once enforcement begins in 2025. By prioritizing compliance, businesses can protect themselves and avoid unnecessary risks in California’s evolving labor landscape.