California law governing the relationship between businesses and independent contractors recently changed, so it’s not a bad time to review if you use freelancers in your business.
As of Jan. 1, having a written contract with certain types of independent contractors is required by law in California. The Freelance Worker Protection Act applies to agreements for services valued at $250 or more, covering roles including freelance writers, content contributors and other professional identified in the Labor Code.
Contracts falling under the FWPA must be in writing and include key details, such as the names and addresses of the parties, an itemized list of services, their value, compensation method and payment.
Payment must be made on the date specified in the contract, or no later than 30 days after the completion of services. Once a freelance worker begins providing services, the hiring entity cannot demand additional work or reduced compensation as a condition for timely payments.
The law also prohibits discrimination or retaliation against individuals exercising their rights under the Act.
The bottom line, as laid out by a recent California Chamber of Commerce article, is written contracts are a best practice for any business working with freelancers in California — legally required or not. Not only does the written contract help clarify the relationship, it also protects your business from potential legal challenges.
It’s also important to remind employers that calling someone an “independent contractor,” even if the worker prefers to be one, does not make them so in the legal sense. California applies the ABC Test to determine if a worker is truly an independent contractor.
I’ve written about the ABC test before. Here’s the quick version to see if a worker is an independent contractor or employee:
(A) that the worker is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact; and
(B) that the worker performs work that is outside the usual course of the hiring entity’s business; and
(C) that the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed.
If the worker does not meet all three ciriteria, they must be classified as an employees, which carries additional responsibilities for wages, benefits and taxes.
California law contains more than 100 distinct exemptions to the ABC test. Here’s some more information about exemptions.
Source: BLOG: News you can use about freelancers, contracts
