New Freelance Worker Rules for City of Los Angeles Effective 7/1/23

New Freelance Worker Rules for City of Los Angeles 

Effective July 1, 2023 

Landlords Beware: This New Ordinance Affects You

The City of Los Angeles’ Freelance Worker Protections Ordinance went into effect on July 1, 2023. The ordinance is similar to requirements in New York City, Minneapolis, and Seattle. The new ordinance was not highly publicized and for many employers, it slipped “under the radar.”  

Under the new ordinance, hiring entities are required to have written contracts with freelance workers for work performed in the city that are valued at $600 or more in a calendar year. The ordinance also requires hiring entities to pay for work completed under the contract in a timely manner and prohibits employers from retaliating against freelance workers for exercising their rights under the ordinance. In addition, the ordinance imposes additional damages and remedies, including attorney's fees and costs. 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.

Businesses that utilize the services of individuals within the City of Los Angeles’ limits that meet the definition of a “freelance worker” under this ordinance should review their practices to ensure that they are in compliance.  Otherwise, they could face additional liability in addition to that already imposed under various state laws that limit and regulate the use of independent contractors.

Under the ordinance, a “freelance worker” means “an individual natural person, or 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.”  The definition of “freelance worker” does not include individual natural persons or entities that (i) are required by law (e.g., the state Business and Professions Code or other law) to have a written agreement to provide services in exchange for compensation; (ii) are an employee of the hiring entity under Los Angeles Municipal Code section 187, et seq., (iii) agree to perform services without compensation; or (iv) have employees other than the one individual natural person who is the sole legal and beneficial owner.

A “hiring entity” is an entity that regularly engages in business or commercial activity such as an owner or operator of any trade or business, including a not-for-profit business, or an entity that represents itself as engaging in any trade or business.  Under this definition, a “hiring entity” also includes rental housing providers that hire “freelance workers” or so-called independent contractors. The definition of a “hiring entity;” however, expressly excludes any entity that hires app-based transportation and delivery drivers to provide prearranged services such as Uber or Lyft.

Under the new 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, and must include 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 payment; 
• The date by which the hiring entity must pay the contracted compensation or the manner by which the payment date is to 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. In addition, both the hiring entity and the freelance worker must each retain written records for at least four years, including copies of contracts, payment records, and any other written or electronic records to demonstrate compliance with the ordinance.

Freelance workers may not grant a waiver of any provision of the ordinance as doing so is deemed contrary to public policy and is; therefore, void and unenforceable.  Furthermore, a hiring entity is prohibited from discriminating or 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, including asserting or attempting to assert rights under the ordinance.

Potential Penalties for Non-Compliance

For hiring entities that fail to comply with the new ordinance, it can be very costly. 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 (“BCA”).  If the freelance worker wishes to pursue an administrative enforcement procedure, a complaint must be filed within one (1) year of the alleged violation.  However, this administrative procedure is not required in order for a freelance worker to file a civil action.  

Any hiring entity that receives an official request for information and / or documents from the BCA must respond within twenty (20) calendar days. In the event a hiring entity fails to respond within this timeframe, they may subject to a rebuttable presumption, or an assumption of fact or law, in any subsequent civil action alleging that it committed the violations.  A successful freelance worker in any private cause of action in a civil lawsuit or BCA proceeding may be entitled to receive damages equal to up to twice the remaining, unpaid amount under the contract, the greater of the value of the contract or the work performed, and civil penalties, depending on the violation. Lastly, the freelance worker in a civil lawsuit may be entitled to reasonable attorney’s fees and costs, injunctive relief, and other remedies as determined by a court.