Freelance Services: California Laws You Need To Know

California's freelance industry is a significant contributor to the state's economy, but freelancers often face issues with late or non-payments. To address this, the state has introduced several laws to protect freelancers, including the Freelance Worker Protection Act (FWPA), which requires written contracts for freelance services valued at $250 or more. This law, which takes effect in January 2025, aims to provide basic worker protections and ensure timely payments for freelancers. Additionally, the state's AB5 and AB2257 laws establish criteria for classifying workers as independent contractors and provide exemptions for certain freelance professions. Understanding these laws is crucial for freelancers in California to navigate their careers confidently and compliantly.

Written contracts are required for work totalling $250 or more over a 120-day period

In California, written contracts are required for freelance work totalling $250 or more over a 120-day period. This is a key provision of the Freelance Worker Protection Act (FWPA), which comes into effect on January 1, 2025. The law aims to provide "basic worker protections" for freelancers, who have historically faced issues of late or non-payment for their work.

The written contract must be signed by both parties and include the following:

• The name and address of each party
• An itemized list of all services to be provided, including their value, and the rate and method of compensation
• The date by which the hiring party will pay the compensation, or how this date will be determined
• The date by which the freelance worker will submit a list of services rendered to the hiring party to ensure timely payment

The contract must be provided to the freelance worker either physically or electronically, and the hiring party must keep a copy of the contract for at least four years.

Even in the absence of a written contract, the FWPA states that the parties' actions and communications can serve as evidence that an agreement was formed. For example, if the rate for services was discussed or the worker completed the expected tasks, this can indicate that a contract was formed, even if it was never put into writing.

It is important to note that the FWPA only applies to contracts between a “hiring party” and a "freelance worker." A hiring party is defined as a person or organization in California that retains a freelance worker for professional services, excluding federal, state, local, or foreign governments, or individuals hiring for personal or familial benefit. A freelance worker is a person hired as a bona fide independent contractor to provide professional services in exchange for $250 or more, either from a single contract or multiple contracts with the same hiring party over a 120-day period.

Professional services refer to services such as marketing, human resources, travel agent services, graphic design, grant writing, fine artistry, photography, videography, photo editing, freelance writing, translating, editing, illustrating, and others.

The FWPA provides freelancers with legal recourse in the case of non-payment, including the potential for double damages and the recovery of attorney's fees.

Freelancers are entitled to minimum wage, overtime pay, meal and rest breaks

In California, freelancers are typically considered their own business rather than employees, so employment laws do not apply to them. However, there are some exceptions to this rule. From January 2025, the California Freelance Worker Protection Act (FWPA) will provide payment protections for freelancers, requiring hiring parties to provide a signed copy of a written contract and pay freelancers on time.

Under the FWPA, freelancers are entitled to a written contract, which must include the following:

• The name and address of each party.
• An itemized list of all services to be provided, including their value and the rate and method of compensation.
• The date the hiring party will pay the compensation or how this date will be determined.
• The date by which the freelancer will submit a list of services rendered to meet the hiring party's internal deadlines for timely payment.

The FWPA also sets out requirements for payment deadlines. Freelancers must be paid:

• By the date specified in the contract.
• If no date is specified, no later than 30 days after completing the services.

In addition, California law provides some protections for freelancers regarding meal and rest breaks. While employment laws regarding breaks generally do not apply to freelancers, there are a few key points to consider:

• Employers must provide non-exempt workers with opportunities to take meal and rest breaks and communicate the legal requirements of these laws.
• If a freelancer works more than five hours in a workday, they are entitled to an uninterrupted 30-minute meal break. This break must be provided before the end of the fifth hour of work.
• For workdays exceeding 10 hours, a second 30-minute meal break is required before the end of the tenth hour.
• Freelancers are also entitled to a 10-minute uninterrupted rest break for every four hours worked.
• Rest breaks must be paid and should be provided in the middle of each work period whenever possible.
• Employers cannot require freelancers to remain on the work premises during rest breaks.

It is important to note that these break requirements may have exceptions for certain industries, such as construction, healthcare, and manufacturing. While employers are not required to ensure that breaks are taken, they must provide the opportunity for them. If an employer fails to provide the required meal and rest breaks, they may face legal consequences and financial penalties.

Freelancers can set their payment terms, send invoices, and outline payment due dates

In California, freelancers are considered self-employed, and as such, they are generally treated as a business rather than an employee. This means that employment laws do not apply to them, and they are not entitled to the same benefits as employees, such as wage and hour laws, family and sick leave, unemployment benefits, workers' compensation, and disability benefits. However, there is an exception for sexual harassment laws, which do apply to freelancers in California.

Despite not being classified as employees, freelancers in California do have certain rights and protections under the law. One important aspect is that freelancers have the right to set their own payment terms and send invoices to clients for services rendered. This means that they can decide how much to charge for their services, when to send invoices, and how to structure their payment due dates.

To protect themselves and ensure timely payment, it is essential for freelancers to have a well-drafted contract in place before beginning any work. This contract should clearly outline the payment terms, including due dates, late fees, and any interest charges for overdue payments. Having a written agreement in place is not only beneficial for record-keeping but also provides legal protection in case of disputes over payment.

In California, the recently enacted Freelance Worker Protection Act (FWPA) further expands protections for freelancers. This law requires a written contract for freelance services valued at $250 or more, outlining the scope of work, payment method, and deadlines. The FWPA also provides freelancers with the right to be paid on time, either by the date specified in the contract or, if no date is specified, within 30 days of completing the services.

In summary, while freelancers in California may not have the same rights as employees, they do have the freedom to set their own payment terms and send invoices. By understanding their rights and complying with relevant laws, such as the FWPA, freelancers can ensure they are paid fairly and on time for their work.

Freelancers are considered self-employed and must pay self-employment taxes

In California, freelancers are considered self-employed, and as such, they are subject to self-employment taxes. This means that they must pay taxes on their self-employment income, which includes income earned as a freelancer, independent contractor, sole proprietor, or business owner. While this provides freedom and the ability to pursue passions, it also comes with the responsibility of managing tax obligations.

Self-employment tax consists of two components: Social Security Tax and Medicare Tax. For Social Security, as of 2022, the tax rate is 12.4% on the first $147,000 of net earnings, with the individual paying half as the employer's share and the other half as the employee's share. The Medicare tax rate, on the other hand, is 2.9% on all net earnings, with no income limit. Additionally, an Additional Medicare Tax of 0.9% may apply if self-employment income exceeds certain thresholds.

To minimize self-employment tax liability in California, freelancers can consider several strategies. Maximizing deductions for qualified business expenses, utilizing retirement accounts, and structuring their business as a corporation or LLC can all help reduce taxable income and self-employment tax liability. It is important for freelancers to stay informed and proactive in managing their tax obligations to ensure compliance with state and federal regulations.

In addition to self-employment taxes, California has recently enacted the Freelance Worker Protection Act (FWPA), which provides "basic worker protections" for freelancers. This law requires written contracts for services valued at $250 or more and ensures transparency by outlining the scope of work, payment methods, and deadlines. It also guarantees freelancers the right to timely payments and protects them from retaliation by hiring entities if they assert their right to fair payment.

Freelancers may need worker's compensation and liability insurance

In California, freelancers are generally treated as small business owners or independent contractors, rather than employees. This means that business laws, rather than employment laws, apply to them.

Freelancers in California may need to consider obtaining workers' compensation and liability insurance. While not legally required, obtaining these types of insurance can provide important protections for freelancers and their businesses.

Workers' compensation insurance is typically not available to freelancers in California since it is considered an employment benefit. However, as a self-employed individual, a freelancer can consider purchasing disability insurance to protect themselves in the event of an injury or illness that affects their ability to work. This can provide financial protection and peace of mind, ensuring that they have a source of income during such periods.

Liability insurance, on the other hand, is highly recommended for freelancers in California. This type of insurance helps protect freelancers and their businesses from financial losses due to mistakes, accidents, or claims. It covers legal expenses and payouts related to accusations of mistakes or breaches of contract that affect a client's bottom line. Many clients may even require freelancers to have liability insurance before signing a contract. Having liability insurance demonstrates to potential clients that the freelancer is responsible and has their best interests in mind.

The specific types of insurance a freelancer may need will depend on their profession and the nature of their work. For example, IT freelancers may need cyber liability insurance to protect against data breaches and cyber attacks, while those renting office space may be required to have general liability insurance. Other types of insurance to consider include commercial property insurance, fidelity bonds, and health insurance.

In summary, while not legally mandated, obtaining workers' compensation and liability insurance can provide important financial protections for freelancers in California, safeguarding their businesses, assets, and income in the event of unforeseen circumstances.

Frequently asked questions