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On July 1, 2023 the City of Los Angeles became the latest municipality to pass an ordinance aimed at protecting independent contractors when it enacted the “Freelance Worker Protections Ordinance.” Similar ordinances are currently in place in New York City, Seattle, and Minneapolis. The ordinance is intended to provide some additional protections for freelance workers in Los Angeles who are unprotected by the employment laws due to their status as independent contractors. For example, the ordinance requires most solo independent contractor agreements to be in writing, contain specific terms, and imposes timely payment and recordkeeping obligations as well. The written contract requirement will be superfluous for the array of independent contractors already required to have a written contract for services to qualify for an exemption to the ABC Test, including those operating under the exemptions for Business to Business, Single Engagement Events, Direct Sales Salespersons, photographers, etc. For those that don't, this ordinance requires that almost all other solo independent contractor arrangements be in writing. The key requirements are summarized in detail below.
Covered Workers. The ordinance applies to “Freelance Workers,” defined as individuals hired or engaged as bona fide independent contractors to perform services for a hiring entity in exchange for compensation. Entities whose interests are held entirely, and whose work is performed entirely, by one person are also covered as Freelance Workers.
The following are specifically excluded from coverage as “Freelance Workers":
- Those required by law to have a written agreement to provide services in exchange for compensation;
- Those who are employed by the hiring entity;
- Those working for no pay; or
- Those who have employees other than the one individual person who is the sole legal and beneficial owner.
Covered Contracting Businesses. The ordinance covers any hiring entity that is regularly engaged in business or commercial activity, including non-profits. The only exclusion is for companies that hire app-based transportation and delivery drivers to provide prearranged services.
Covered Activity. The ordinance only applies to the following: (1) a written or oral contract between a covered worker and hiring entity entered into on or after July 1, 2023; and (2) work performed within the City of Los Angeles by a covered worker that is entitled to payment of $600 or more in a calendar year from the same hiring entity.
Requirements. The ordinance imposes the following requirements on the relationships between hiring entities and covered workers:
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Written Contract. Any contract between a hiring entity and covered worker valued at $600 or more (either by itself or when aggregated with previous contracts in the same calendar year) must be in writing.
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Required Contractual Terms. The following items must appear in written contracts between hiring entities and covered workers: (i) the name, mailing address, phone number, and e-mail address (if available) of both the hiring entity and worker; (ii) an itemization of all services to be provided by the worker, including the value of the services to be performed pursuant to the contract and the rate and method of compensation; and (iii) the date by which the hiring entity must pay the worker or the manner by which the date will be determined.
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Timely Payment. Hiring entities must pay the full amount owed to the worker by the payment date specified in the contract. If there is no written contract or the contract does not specify a date, then full payment must be made no later than 30 days after services are rendered.
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Recordkeeping. Both the hiring entity and the worker must retain written records demonstrating compliance with the ordinance for at least 4 years, including any contracts and payment records.
No Waiver. The requirements of the ordinance may not be waived by the contracting parties.
No Retaliation. The ordinance contains a no-retaliation provision, prohibiting a hiring entity from taking an adverse action against a worker for exercising their rights under the ordinance.
Penalties for Violations. The ordinance imposes different penalties depending on the violation. If a hiring entity fails to timely pay a worker, then the worker may recover double the unpaid portion of the contractual amount. If the hiring entity refuses to provide a written contract to the worker, then the worker may receive $250 in addition to any other remedy. For any other violation of the ordinance, the worker may receive the greater of the value of the contract or the work performed. The ordinance also provides for attorney’s fees and injunctive relief as well.
Enforcement Procedures. The Office of Wage Standards of the Bureau of Contract Administration within the Department of Public Works is the delegated enforcement agency. The agency will investigate any complaints regarding compliance with the ordinance and can request information and documents from hiring entities. Covered workers may file a complaint with the agency or bring a civil action in court directly.
Those who hire individual freelance workers in the City of Los Angeles must ensure that they are complying with the new requirements imposed by the ordinance. Specifically, impacted businesses need to ensure that the required contractual terms are in their agreements with freelance workers and that payment is timely made.
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