Effective July 1, 2023, the Freelance Worker Protections Ordinance of the City of Los Angeles became effective, imposing new requirements on the use of independent contractors and freelance workers together with new penalties for the violation of its requirements.  Its provisions apply to a written or oral contract between a freelance worker and a hiring entity entered into on or after July 1, 2023 and to work performed within the city by a freelance worker that is entitled to payment of $600 or more in a calendar year for the same hiring entity.  The new ordinance was not highly publicized and was enacted with little fanfare.  It applies to work performed with the city limits.

For the purpose of this ordinance, a “freelance worker” means “an individual natural person, or an entity whose legal and beneficial interests are held entirely and whose work is performed entirely by no more than one individual natural person, hired or engaged as a bona fide independent contractor to perform services for a Hiring Entity in exchange for compensation.”  It does not include an individual natural person or entity that (a) is required by the state Business and Professions Code or other law to have a written agreement to provide services in exchange for compensation; (b) is an employee of the hiring entity under Los Angeles Municipal Code section 187, et seq., (c) agrees to perform services for a hiring entity for no pay; or (d) has employees other than the one individual natural person who is the sole legal and beneficial owner.  

“Hiring entity” is defined as an entity regularly engaged in business or commercial activity, i.e., an entity that owns or operates any trade or business, including a not-for-profit business, or represents itself as engaging in any trade or business.  It expressly does not include an entity that hires app-based transportation and delivery drivers to provide prearranged services.

Under the ordinance, any contract between a hiring entity and a freelance worker valued at $600 or more, either by itself or when aggregated with previous written or oral contracts between the hiring entity and the freelance worker in a calendar year, must be in writing.  The written contract must include, at a minimum, all of the following information:

• The name, mailing address, phone number, and, if available, email address of both the hiring entity and the freelance worker;
• 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; and
• The date by which the hiring entity must pay the contracted compensation or the manner by which such date will be determined.

The hiring entity must provide full payment to the freelance worker on or before the date specified in the written contract or, if the written contract does not specify a due date or if there is no written contract, no later than 30 calendar days after services are rendered.

Both the hiring entity and the freelance worker must each retain written records related to this ordinance for at least four years, including contracts, payment records, and any other written or electronic records to demonstrate compliance.

Any waiver by a freelance worker of any provision of this ordinance is deemed contrary to public policy and is void and unenforceable.  A hiring entity is prohibited from discriminating or otherwise taking any adverse action against a freelance worker that penalizes the freelance worker for, or is reasonably likely to deter a freelance worker from opposing any practice prohibited by the ordinance, participating in proceedings related to the ordinance, seeking to enforce rights under the ordinance by lawful means, or otherwise asserting or attempting to assert rights under the ordinance.

In addition to creating a private cause of action in a civil lawsuit for a violation of the ordinance, the ordinance provides a reporting and enforcement proceeding through the City’s Office of Wage Standards of the Bureau of Contract Administration with the Department of Public Works (“DAA”).  If the freelance worker elects to pursue this administrative enforcement procedure, a complaint must be filed within one year of the alleged violation.  However, this administrative procedure is not a prerequisite to filing a civil action.  A hiring entity that receives a request for information and/or documents from the DAA but fails to respond within 20 calendar days is subject to a rebuttable presumption in any subsequent civil action that it committed the alleged violations.  A successful freelance worker is entitled to damages of up to twice the amount that remains unpaid under the contract, the greater of the value of the contract or the work performed, as well as a civil penalty, depending on the violation.  In addition, the successful freelance worker in a civil lawsuit is entitled to reasonable attorney’s fees and costs, injunctive relief, and other remedies deemed appropriate by a court.

Business entities that use individuals within city limits that meet the definition of a freelance worker under this ordinance should review their practices and ensure that they are in compliance.  Otherwise, they could be faced with additional onerous liability in addition to that already imposed under various state laws that limit and regulate the use of independent contractors.