California has gone to great lengths to limit independent contractor relationships and recently, the City of Los Angeles, created additional hurdles to the hiring and use of independent contractors or freelance workers. The Los Angeles Freelance Worker Protections Ordinance, effective July 1, 2023, imposes new requirements on businesses that work with independent contractors within the City of Los Angeles. Employers and businesses in Los Angeles must now follow these new requirements when using independent contractors or risk being penalized for violation of the provisions of the new ordinance which provides for monetary penalties and damages under a newly created private cause of action.
The Ordinance claims that is attempting to protect independent contractors against delayed, non- and underpayment.
Who Does The Ordinance Apply To?
With few exceptions, any entity doing business in Los Angeles and or that hires an independent contractor to provide services within the City of Los Angeles is covered if the value of the services provided within the City limits exceeds $600 in one calendar year.
A “freelance worker” or independent contractor is a person, or entity whose work is performed entirely by no more than one individual natural person, engaged to perform services for the hiring entity in exchange for compensation.
Exceptions
The Ordinance does not apply to the hiring of app-based transportation and delivery drivers such as ridesharing companies like Uber.
In addition, the Ordinance does not apply when a worker:
- is already required by law to have a written agreement to provide services in exchange for compensation;
- is already an employee of the hiring entity;
- agrees to perform services for the hiring entity at no pay (i.e., volunteers); or
- has employees other than the one individual natural person who is also the sole legal and beneficial owner.
The Mandate
The new ordinance requires a written contract that includes:
- 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 when payment is due.
Payment in full must be made on or before the date specified in the written contract, or, in some cases, no later than 30 days after services are rendered.
The ordinance prohibits retaliation or adverse actions against a freelance worker from using the Ordinance or seeking to enforce it and, the parties, cannot, by contract, waive the obligations.
The Paperwork
The parties must retain written records including the contract itself, any payment records, and other written or electronic records to demonstrate compliance for at least four years.
The Enforcement
The Ordinance assigns enforcement to the Office of Wage Standards of the Bureau of Contract Administration (“Office”) and provides a framework for independent contractor complaints to the Office. Complaints must be made within one year of any alleged violation. The Office may investigate and contact the business and obtain documents and other information related to any complaint.
If a business fails to respond to the Office within 20 calendar days, the independent contractor obtains a rebuttable presumption that the ordinance was violated. Thereafter, the independent contractor may bring a private lawsuit and seek penalties, double damages for a failure to timely pay, other damages, and attorneys’ fees and costs. However, even without filing a complaint with the Office, the independent contractors may commence private litigation.
Next Steps
Employers and businesses that utilize independent contractors to provide services within the City of Los Angeles should carefully examine their policies and consult with their favorite attorney to prepare agreements that will comply with Los Angeles’ ordinance. Moreover, such businesses must be aware of receipt of a notice from the Office so that they may timely reply and avoid a reversal of the burdens of proof.
