Freelancers have long voiced frustrations about late payments—or worse, not getting paid at all. In response, three of the largest states in the U.S. have passed new legislation to protect freelance workers. If your business hires independent contractors in California, Illinois, or New York, it’s critical to understand what these new laws require.
This blog post outlines the key provisions, who’s affected, and the steps businesses should take to stay compliant.
Why These Laws Matter
California, Illinois, and New York have all enacted laws aimed at ensuring freelancers are paid fairly and on time. Each state now requires written agreements between hiring firms and freelance workers, with strict penalties for failure to comply.
Here are the laws and their effective dates:
- California Freelance Worker Protection Act – Effective January 1, 2025
- Illinois Freelance Worker Protection Act – Effective July 1, 2024
- New York Freelance Isn’t Free Act – Effective August 28, 2024
(Note: New York City has had a similar law in place since 2017)
Who These Laws Cover
These laws apply to independent contractors—individuals or one-owner businesses providing services outside of an employee relationship.
- California and New York include individuals operating as sole proprietors, LLCs, or corporations (as long as there’s only one owner).
- Illinois limits coverage to individual freelancers (excluding LLCs and corporations).
California: Narrower Scope
California’s law only applies to certain freelance professions, including:
- Writers, editors, graphic designers
- Photographers, videographers, illustrators
- Marketing and HR professionals
- Appraisers, estheticians, barbers, and others
Excluded Freelancers
- Illinois: Construction workers
- New York: Sales reps, lawyers, licensed healthcare professionals, construction workers
What Businesses Are Affected?
The laws apply to private businesses of all sizes that hire freelance workers in or from the respective states.
Government entities are exempt.
- California applies to any business located in California or hiring freelancers from California.
- Illinois applies broadly—covering both in-state and out-of-state firms that hire Illinois-based freelancers or contract for work performed in Illinois.
- California also exempts individuals hiring for personal household services (e.g., a babysitter or gardener for your home).
When a Contract Is Required
You must provide a written agreement if payments to the freelancer exceed:
- $250 in California (over the past 120 days)
- $500 in Illinois (over the past 120 days)
- $800 in New York (over the past 120 days)
What the Contract Must Include
Each agreement must contain:
- Names and mailing addresses of both parties
- Description of services
- Rate and method of compensation
- Payment deadline (or how it will be determined)
- Freelancer’s deadline to submit deliverables
The contract can be electronic or paper, and you must retain it for:
- 4 years (California)
- 2 years (Illinois)
- 6 years (New York)
Payment Deadlines and Legal Risk
If the contract doesn’t specify a payment date, the law requires payment within 30 days of service completion.
Once a freelancer begins work, you cannot ask them to accept less compensation as a condition of getting paid on time.
Penalties for Non-Compliance
Failing to follow these laws can lead to:
- Double damages for non-payment
- Attorney fees
- Statutory penalties:
- $1,000 in California
- $500 in Illinois
- $250 in New York
- $1,000 in California
- Retaliation damages (if the freelancer is punished for asserting their rights)
- Civil penalties up to $25,000 in New York for repeat violations
Freelancers may also file complaints with state agencies or attorneys general, who have the power to investigate and prosecute violations.
No Retaliation Allowed
The laws prohibit businesses from retaliating against freelancers who seek to enforce their rights—this includes harassment, blacklisting, or contract cancellations done in bad faith.
Key Takeaways
- Written contracts are now mandatory when hiring freelancers above certain dollar thresholds in CA, IL, and NY.
- Freelancers must be paid on time, or businesses risk double damages and legal fees.
- Statutory penalties apply even if the freelancer is paid—just failing to provide a contract can trigger fines.
- Businesses of all sizes are subject to these rules, regardless of location, if hiring freelancers in the covered states.
What You Should Do Next
- Review your current freelancer onboarding and payment practices.
- Create a standard independent contractor agreement that meets state requirements.
- Educate your team to ensure contracts and payment deadlines are handled correctly.
- Keep documentation for the legally required number of years.
Need help drafting a compliant agreement? [Download our free freelance agreement template.]
Stay informed, stay compliant, and respect the freelancers who help your business thrive.
