Why Employers Outside California Should Pay Attention to SB 998 and the Freelance Worker Protection Act

California’s labor laws have a way of influencing business far beyond state lines. The state’s size, economic power, and regulatory trends often set the stage for national shifts. Now, with the Freelance Worker Protection Act (FWPA) under SB 998, businesses across the country should take notice—especially those working with California-based freelancers.

Whether a company is headquartered in New York, Texas, or anywhere else, if it hires independent contractors in California, this law applies. And even businesses that don’t may still feel its ripple effects as other states take cues from California’s approach.

Mandatory Written Contracts

Gone are the days of handshake deals and vague email agreements—at least for California freelancers. Under SB 998, any freelancer contract worth $250 or more requires a formal written agreement. The law applies whether the payment is a one-time fee or adds up over 120 days.

For companies used to informal arrangements, this means updating their hiring process. Every contract must now include:

• Scope of work – Clearly defined deliverables.
• Compensation terms – Rate, method, and structure of payment.
• Payment deadlines – Specific due dates for invoices.

Failure to document these details puts businesses at risk of fines, particularly if payment disputes arise. Additionally, companies must keep these contracts on file for four years. A freelancer filing a claim within that window could put a business under legal scrutiny.

For out-of-state employers, the safest approach is to treat every California-based freelancer contract as a legal requirement, not a suggestion. Standardized contract templates that align with FWPA requirements can prevent compliance headaches.

A New Era of Freelancer Protections

The FWPA enforces strict payment deadlines with real financial consequences. If a contract specifies a payment date, businesses must meet it. If no date is set, the law defaults to 30 days after project completion.

Late payments come with significant penalties:

• Double damages – A freelancer can recover twice the unpaid amount in a legal dispute.
• Legal fees – The business may be forced to cover the freelancer’s attorney costs.
• Additional fines – Non-compliance can lead to further financial penalties.

Companies can’t get around these rules by simply refusing to work with freelancers who assert their rights. Retaliation—such as firing or blacklisting a freelancer for demanding timely payment—could lead to even more legal trouble.

For businesses working with California freelancers, on-time payments are now non-negotiable. The easiest way to stay compliant is to audit existing payment processes and ensure accounts payable departments can meet the 30-day rule.

What Businesses Should Do Now

Employers that rely on independent contractors need to adapt quickly. A proactive approach reduces legal risk and ensures smooth freelancer relationships. Key steps include:

• Updating contract templates – Every freelancer agreement should include FWPA-mandated terms.
• Training internal teams – Hiring managers and finance departments must understand the law’s requirements.
• Improving payment processing – Companies should evaluate whether their current systems can guarantee payment within 30 days.
• Maintaining records – Signed contracts must be stored for at least four years to protect against potential claims.

Even businesses that don’t currently work with California freelancers should take note. Other states have a history of following California’s lead on labor protections. Adopting best practices now could help businesses avoid future surprises.

Get Help on Freelancer Compliance

California’s labor laws affect more businesses than most realize. If your company works with independent contractors, ignoring SB 998 could mean fines, lawsuits, and reputational risks. Updating contracts, payment systems, and internal policies is essential.

Our firm advises businesses on labor law compliance, contract drafting, and risk mitigation. Contact Christopher Butler at Agenzia to ensure your freelancer agreements are legally sound and your payment policies won’t lead to costly penalties.