Written Contract Will Be Required For Many Independent Contractors And Freelance Workers In Los Angeles Starting July 1, 2023
A new city ordinance in Los Angeles will take effect on July 1, 2023, which requires a written contract for many independent contractors and freelance workers who work in the city. This ordinance, known as the Freelance Worker Protection Ordinance, is similar to requirements in New York City, Minneapolis, and Seattle. Here is what employers should know:
What Workers Are Covered: The ordinance covers “Freelance Workers,” defined as an individual natural person, or an entity that is held by, and whose work is performed by, an individual natural person. The ordinance covers Freelance Workers who perform work in the City of Los Angeles.
What Workers Are Excluded: The ordinance excludes Freelance Workers:
- That are already required by law to have a written agreement to provide services in exchange for compensation;
- That are already an employee of the hiring entity;
- That agree to perform work for no pay; and
- An entity that has employees other than the one individual natural person who is the sole legal and beneficial owner of the entity.
What Employers Are Covered: A “Hiring Entity” is covered by the ordinance, which is defined as an entity regularly engaged in business or commercial activity, including owning or operating a trade or business, a non-profit business, or an entity that represents itself as engaging in any trade or business. Entities that hire app-based transportation and delivery drivers to provide prearranged services are excluded from the ordinance.
When Is A Written Contract Required: A written contract is required for any Freelance Worker and Hiring Entity that enter into a written or oral contract on or after July 1, 2023, where the work performed within the City of Los Angeles entitles the Freelance Worker to payment of $600 of more in the calendar year from that Hiring Entity.
What Is Required In The Contract: Any agreement between a Hiring Entity and Freelance Worker valued at $600 or more, either by itself or when aggregated with prior written or oral contracts between them in a calendar year, must be in writing and must include:
- The name, address, phone number, and e-mail (if available) of the Hiring Entity and Freelance Worker;
- An itemization of all services to be provided, the value of those services, and the rate and method of compensation; and
- The date by which the Hiring Entity must pay or the manner by which such date will be determined.
Payment Deadline And Other Requirements: The Hiring Entity must provide full payment of the contract on or before the date specified in the contract, or if the contract does not specify a due date or if there is no written contract, no later than 30 days after the services are rendered. Written records of the contracts and payments, and any other records that demonstrate compliance with the ordinance, must be kept for at least four years. Hiring Entities are prohibited from retaliating against Freelance Workers that oppose practices prohibited by the ordinance, that participate in proceedings related to the ordinance, that lawfully seek to enforce rights under the ordinance, and/or that assert or attempt to assert rights under the ordinance.
Violations Of The Ordinance: A Freelance Worker can file a complaint with the Office of Wage Standards of the Bureau of Contract Administration within the Department of Public Works or can bring a civil action for violation of the ordinance. Damages may include:
- An award of $250 if the Freelance Worker requested a written contract prior to commencing work and the Hiring Entity refused;
- If the Hiring Entity fails to timely pay for the services, the Freelance Worker “shall be awarded” damages up to twice the amount that remains unpaid under the contract;
- For any other violations of the ordinance, the Freelance Worker “shall be awarded” the greater of the value of the contract or the work performed; and
- The Freelance Worker may be entitled to attorneys’ fees and costs.
Using Freelance Workers in California is already fraught with danger for employers if employers incorrectly apply the “employee versus independent contractor” analysis.
See our prior blog posts:
- NLRB Revives A More Stringent Standard For Independent Contractor Classification
- California Court Of Appeal Holds That App-Based Driver And Delivery Businesses Can Properly Classify Workers As Independent Contractors
This ordinance adds new dangers to unwary employers even if they correctly apply the independent contractor test to Freelance Workers working in Los Angeles. If you have any questions about this new ordinance, contact your favorite CDF attorney.