California has added another law to the books that impacts small business owners: the Freelance Worker Protection Act (FWPA). Signed into law on September 28, 2024, this legislation reshapes how businesses work with independent contractors, adding new requirements that can’t be ignored. If your business regularly hires freelancers for marketing, design, writing, photography, or similar services, this law applies to you.
Mandatory Written Contracts
California now requires businesses to have a written contract for any freelancer engagement of $250 or more. This threshold applies whether the amount is in a single contract or accumulates over 120 days—a detail that catches many businesses off guard.
Every contract must include:
- Scope of work – What the freelancer is being hired to do.
- Compensation terms – The agreed-upon rate and method of payment.
- Payment deadlines – A clear timeline for when the freelancer will be paid.
Failing to provide a written contract automatically puts a business at risk of a $1,000 penalty if other violations occur, such as delayed payment. Keeping signed copies for at least four years is now a legal obligation.
For businesses that have been working informally with freelancers—verbal agreements, email confirmations, or handshake deals—this law means making changes. It’s time to formalize every freelancer agreement, no matter how small.
Strict Payment Rules and Penalties
The FWPA also establishes non-negotiable payment deadlines. If a contract specifies a payment date, the business must honor it. If no date is given, payment is due within 30 days of completing the work. Late payments can lead to severe penalties, including:
- Double damages – The freelancer can recover twice the unpaid amount in a dispute.
- Legal costs – Businesses may be forced to cover the freelancer’s attorney fees.
- Additional fines – Other financial penalties can apply for non-compliance.
This law also prohibits retaliation against freelancers who assert their rights under the FWPA. Firing a freelancer or refusing to hire them again because they requested timely payment could lead to further legal trouble.
The easiest way to avoid penalties? Stick to the contract, pay on time, and keep records.
How Businesses Should Prepare
Businesses that rely on freelancers should take these steps before the FWPA takes effect:
- Review and update contracts – Ensure every freelancer agreement includes the required details.
- Train staff – Hiring managers and accounts payable teams need to understand the new requirements.
- Adjust payment systems – Businesses should ensure they can process payments within 30 days if necessary.
- Keep records – Retain all freelancer contracts for at least four years to avoid compliance issues.
Need Help?
California’s ever-changing labor laws constantly create new risks for small businesses, but the right legal guidance can help your company stay compliant without unnecessary headaches. Give Integrated General Counsel, P.C. a call at (925) 399-1529 to get ahead of SB 988 before it impacts your business.
