The City of Los Angeles Tightens Requirements for Hiring Independent Contractors

On July 1, 2023, the Freelance Worker Protections Ordinance (the “Ordinance”) went into effect in the City of Los Angeles and imposes additional requirements on businesses hiring independent contractors on top of what is already required by California’s infamous “ABC Test.”

Who qualifies as a “Freelance Worker”?

The Ordinance only applies to independent contractors who are a natural person or entity composed of no more than one person, who is hired by a business (the “Hiring Entity") to provide services in exchange for compensation.

?The Ordinance does not apply to the following types of workers:

1. Individuals who perform services without compensation, such as volunteers;
2. Individuals who are already employees of a Hiring Entity;
3. Individuals who are already legally required to enter into a written agreement in order to provide services in exchange for compensation;
4. Individuals who themselves have one or more employees;
5. App-based transportation and delivery drivers such as ridesharing companies (i.e., Uber, Lyft, GrubHub, DoorDash, etc.)

Who qualifies as a Hiring Entity?

A Hiring Entity is an entity that is regularly engaged in business or commercial activity. The Ordinance does not apply to entities that hire app-based drivers for transportation or delivery services.

What type of work does the Ordinance apply to?

The Ordinance applies to work that the Freelance Worker is hired to perform within the City of Los Angeles that is valued at $600 or more either by an individual job or cumulative jobs within one calendar year.

What does the Ordinance require?

1. The Hiring Entity must provide the Freelance Worker with a written contract for agreements valued at $600 or more, and the written contract shall include, at a minimum, the following information:a. The name, mailing address, phone number, and email address (if available) of the Hiring Entity and the Freelance Worker;b. An itemization of all services to be provided by the Freelance Worker, the value of the services to be provided pursuant to the contract, and the rate and method of compensation; andc. The date by which the hiring entity must pay the contracted compensation or the manner by which such date will be determined.
2. The Hiring Entity must provide the Freelance Worker with full payment by the date specified in the written contract. If the written contract does not include a date, the Hiring Entity must provide payment no later than 30 days after the work is completed.
3. Both the Hiring Entity and the Freelance Worker must retain records for 4 years. This includes the contract, record of payment, and any other written or electronic records that demonstrate compliance with the Ordinance.
4. The Hiring Entity may not punish, penalize, retaliate, or take any adverse employment action against any Freelance Workers for exercising their rights.
5. The Hiring Entity and the Freelance Worker cannot enter into an agreement to waive the rights and obligations outlined in the Ordinance.

What happens if the Ordinance is violated?

Violation of the Ordinance may expose Hiring Entities to an investigation by the Los Angeles City Office of Wage Standards or a civil lawsuit.

Businesses with operations in the City of Los Angeles are encouraged to contact experienced employment counsel to review all existing and proposed independent contractor relationships and agreements.

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