California Imposes New Rules for Engaging Certain Independent Contractors
This year, Governor Newsom signed into law Senate Bill 988, the Freelance Worker Protection Act (“FWPA”) imposing greater protections for certain freelance workers (i.e., independent contractors).
The following FAQ summarizes the key components of the new law:
Q: What is the FWPA?
A: The FWPA imposes requirements on “hiring entities” and freelance workers who are hired to provide “professional services.”
Q: When does it go into effect:
A: The FWPA goes into effect January 1, 2025.
Q: Who is a “freelance worker” under the new law?
A: Under the new law, “freelance worker” is defined as a person or organization composed of no more than one person, whether or not incorporated or employing a trade name, that is hired or retained as a bona fide independent contractor by the hiring party to provide professional services in exchange for an amount equal to or greater than $250.
Q: What are “professional services”?
A: “Professional services” has the same meaning as paragraph (2) of subdivision (b) of Section 2778 of the Labor Code . It is defined as follows:
(A) Marketing, provided that the contracted work is original and creative in character and the result of which depends primarily on the invention, imagination, or talent of the individual or work that is an essential part of or necessarily incident to any of the contracted work.
(B) Administrator of human resources, provided that the contracted work is predominantly intellectual and varied in character and is of such character that the output produced or the result accomplished cannot be standardized in relation to a given period of time.
(C) Travel agent services provided by either of the following:
(i) A person regulated by the Attorney General under Article 2.6 (commencing with Section 17550) of Chapter 1 of Part 3 of Division 7 of the Business and Professions Code.
(ii) An individual who is a seller of travel within the meaning of subdivision (a) of Section 17550.1 of the Business and Professions Code and who is exempt from the registration under subdivision (g) of Section 17550.20 of the Business and Professions Code.
(D) Graphic design.
(E) Grant writer.
(F) Fine artist.
(i) For the purposes of this subparagraph, “fine artist” means an individual who creates works of art to be appreciated primarily or solely for their imaginative, aesthetic, or intellectual content, including drawings, paintings, sculptures, mosaics, works of calligraphy, works of graphic art, crafts, or mixed media.
(G) Services provided by an enrolled agent who is licensed by the United States Department of the Treasury to practice before the Internal Revenue Service pursuant to Part 10 of Subtitle A of Title 31 of the Code of Federal Regulations.
(H) Payment processing agent through an independent sales organization.
(I) Services provided by any of the following:
(i) By a still photographer, photojournalist, videographer, or photo editor who works under a written contract that specifies the rate of pay and obligation to pay by a defined time, as long as the individual providing the services is not directly replacing an employee who performed the same work at the same volume for the hiring entity; the individual does not primarily perform the work at the hiring entity’s business location, notwithstanding paragraph (1) of subdivision (a); and the individual is not restricted from working for more than one hiring entity. This subclause is not applicable to a still photographer, photojournalist, videographer, or photo editor who works on motion pictures, which is inclusive of, but is not limited to, theatrical or commercial productions, broadcast news, television, and music videos. Nothing in this section restricts a still photographer, photojournalist, photo editor, or videographer from distributing, licensing, or selling their work product to another business, except as prohibited under copyright laws or workplace collective bargaining agreements.
(ii) To a digital content aggregator by a still photographer, photojournalist, videographer, or photo editor.
(iii) For the purposes of this subparagraph the following definitions apply:
(I) “Photo editor” means an individual who performs services ancillary to the creation of digital content, such as retouching, editing, and keywording.
(II) “Digital content aggregator” means a licensing intermediary that obtains a license or assignment of copyright from a still photographer, photojournalist, videographer, or photo editor for the purposes of distributing that copyright by way of sublicense or assignment, to the intermediary’s third-party end users.
(J) Services provided by a freelance writer, translator, editor, copy editor, illustrator, or newspaper cartoonist who works under a written contract that specifies the rate of pay, intellectual property rights, and obligation to pay by a defined time, as long as the individual providing the services is not directly replacing an employee who performed the same work at the same volume for the hiring entity; the individual does not primarily perform the work at the hiring entity’s business location, notwithstanding paragraph (1) of subdivision (a); and the individual is not restricted from working for more than one hiring entity.
(K) Services provided by an individual as a content contributor, advisor, producer, narrator, or cartographer for a journal, book, periodical, evaluation, other publication or educational, academic, or instructional work in any format or media, who works under a written contract that specifies the rate of pay, intellectual property rights and obligation to pay by a defined time, as long as the individual providing the services is not directly replacing an employee who performed the same work at the same volume for the hiring entity, the individual does not primarily perform the work at the hiring entity’s business location notwithstanding paragraph (1) of subdivision (a); and the individual is not restricted from working for more than one hiring entity.
(L) Services provided by a licensed esthetician, licensed electrologist, licensed manicurist, licensed barber, or licensed cosmetologist provided that the individual:
(i) Sets their own rates, processes their own payments, and is paid directly by clients.
(ii) Sets their own hours of work and has sole discretion to decide the number of clients and which clients for whom they will provide services.
(iii) Has their own book of business and schedules their own appointments.
(iv) Maintains their own business license for the services offered to clients.
(v) If the individual is performing services at the location of the hiring entity, then the individual issues a Form 1099 to the salon or business owner from which they rent their business space.
(vi) This subparagraph shall become inoperative, with respect to licensed manicurists, on January 1, 2025.
(M) A specialized performer hired by a performing arts company or organization to teach a master class for no more than one week. “Master class” means a specialized course for limited duration that is not regularly offered by the hiring entity and is taught by an expert in a recognized field of artistic endeavor who does not work for the hiring entity to teach on a regular basis.
(N) Services provided by an appraiser, as defined in Part 3 (commencing with Section 11300) of Division 4 of the Business and Professions Code.
(O) Registered professional foresters licensed pursuant to Article 3 (commencing with Section 750) of Chapter 2.5 of Division 1 of the Public Resources Code.
Q: Who is subject to the FWPA?
A:”Hiring party” means a person or organization in the State of California that retains a freelance worker to provide professional services, except any of the following:
(1) The United States government.
(2) The State of California or any subdivision thereof.
(3) A foreign government.
(4) An individual hiring services for the personal benefit of themselves, their family members, or their homestead.
Q: What is required under the FWPA?
A: The FWPA includes three key provisions consisting of a requirement to enter into written contracts with specific elements, requirements surrounding payment, and new prohibitions.
Q: What are the specific requirements for written contracts?
A: Under the new law, an agreement between a hiring party and a freelance worker must be in writing and include the following:
- names and addresses of both parties;
- an itemized list of services that the freelance worker will provide, including the value of the services (how much is being charged) and the method of compensation;
- the date by which the hiring party must pay the freelance worker for services rendered, or if there is no specific date, the mechanism by which the date will be determined; and
- the date by which the freelance worker must submit a list of the services rendered under the contract to the hiring party to ensure timely payment.
Q: What are the new payment requirements for freelance workers?
A: The hiring party must pay the independent contractor on the date specified in the contract. If no date is specified, payment must be made within 30 days after the completion of the services.
Q: What are the prohibitions under the FWPA?:
A: The law prohibits hiring parties from requiring freelance workers to do any of the following:
(a) Accept lower compensation than what is specified in the contract.
(b) Provide additional goods or services than what is specified in the contract.
(c) Grant extra intellectual property rights as a condition for timely payment.
Q: Are there are any anti-retaliation provisions?
A: Yes. A hiring party may not discriminate or take any adverse action against a freelance worker that penalizes a freelance worker for, or is reasonably likely to deter a freelance worker from, taking any of the following actions:
(a) Opposing any practice prohibited by this part.
(b) Participating in proceedings related to the enforcement of this part.
(c) Seeking to enforce rights provided by this part.
(d) Otherwise asserting or attempting to assert rights provided by this part.
If you have questions surrounding this new law or would like general guidance about the matters discussed in this issue of Compliance Matters, please call your firm contact at (818) 508-3700 or visit us online at www.brgslaw.com .
Sincerely,