Law Now Requires Written Contract for Independent Contractors
Do I need a written contract if I have an independent contractor working for me?
In California, the relationship between businesses and independent contractors is subject to strict legal standards. As of January 1, 2025, having a written contract with certain types of independent contractors is required by law.
Legal Framework: The ABC Test
As a reminder, calling someone an “independent contractor,” even if the worker prefers to be one, does not make them an independent contractor in the legal sense.
California applies the “ABC Test” to determine if a worker is truly an independent contractor. Under this test, a worker is presumed to be an employee unless the hiring entity can demonstrate all three of the following:
- The worker is free from control and direction of the hiring entity in connection with the performance of the work;
- The worker performs work that is outside the usual course of the hiring entity’s business; and
- The worker is customarily engaged in an independently established trade, occupation or business of the same nature as the work performed.
If the worker does not meet all three criteria, the worker must be classified as an employee, which carries additional business responsibilities for wages, benefits and taxes.
Businesses also should note that California law contains more than 100 distinct exceptions to the ABC test, varying in their specificity and complexity.
Freelance Worker Protection Act
Effective January 1, 2025, the Freelance Worker Protection Act (FWPA) establishes specific requirements for businesses utilizing freelance workers who provide “professional services” as defined in Labor Code Section 2778. The FWPA applies to agreements for services valued at $250 or more, covering roles like freelance writers, content contributors and other professionals identified in the Labor Code.
Contracts falling under the FWPA must be in writing and include key details, such as the names and addresses of the parties, an itemized list of services, their value, compensation method, and payment information, including due dates.
Payment must be made on the date specified in the contract or no later than 30 days after the completion of services. Once a freelance worker begins providing services, the hiring entity cannot demand additional work or reduced compensation as a condition for timely payment.
In addition, the law prohibits discrimination or retaliation against individuals exercising their rights under the FWPA.
The Bottom Line
Although a written contract may not always be legally required, it is a best practice for any business working with freelance workers in California. Not only does the written contract help clarify the relationship, but it also protects your business from potential legal pitfalls, particularly under the ABC Test and the new FWPA.
Vanessa M. Greene, J.D., Employment Law Subject Matter Expert, CalChamber
CalChamber members can read more about Independent Contractors in the HR Library. Not a member? Learn how to power your business with a CalChamber membership.