If your business hires independent contractors—also known as freelancers—you need to pay close attention to new laws passed in California, Illinois, and New York. These three states have implemented legislation requiring written agreements for most freelance work, and the penalties for non-compliance can be severe.
In short: If you operate in, hire from, or even just work with freelancers in these states, you could be on the hook for double damages, statutory fines, and legal fees if you don’t follow the rules.
Let’s break it down.
What’s Changed?
Each state now mandates that businesses put certain freelance relationships in writing. These aren’t just “best practices”—they’re legal requirements with teeth.
Here are the laws:
California Freelance Worker Protection Act
Effective: January 1, 2025Illinois Freelance Worker Protection Act
Effective: July 1, 2024New York Freelance Isn’t Free Act (statewide version)
Effective: August 28, 2024
(NYC has had a version of this law since 2017)
Who Is Covered?
Freelancers:
Each law applies to independent contractors—non-employees who run their own businesses or operate as solo professionals.
California: Applies to a specific list of industries including marketing, design, HR, video, writing, and others—even if they use an LLC or corporation with just one owner.
Illinois: Covers all freelancers (except construction), but only if they are individuals—not LLCs or corporations.
New York: Covers most freelancers, except sales reps, lawyers, licensed medical professionals, and construction contractors.
Hiring Businesses:
If you are a business (of any size) hiring a freelancer who lives or works in one of these states, you’re covered. It doesn’t matter if your company is located elsewhere.
Important: If you hire someone in California or Illinois, or if your business is located in one of those states—even if your freelancer lives somewhere else—you may still be liable.
When Do You Need a Written Agreement?
You’re legally required to provide a signed agreement before work begins if the value of services exceeds these thresholds (over a 120-day period):
California: $250 or more
Illinois: $500 or more
New York: $800 or more
These contracts must include:
Names and mailing addresses of both parties
A detailed description of the services
Payment terms (amount, method, timeline)
When invoices must be submitted
A specific deadline for payment
You can use paper or digital contracts, but you must keep them for a set time:
4 years (California)
2 years (Illinois)
6 years (New York)
What Happens If You Don’t Comply?
The penalties are not minor.
Failure to use a contract:
CA: $1,000 fine
IL: $500 fine
NY: $250 fine
Late or missing payment:
You can be ordered to pay twice the amount owed
Plus attorney fees
Retaliation:
If you harass, threaten, or blacklist a freelancer for asking for a contract or payment, the state can hit you with additional penalties.
New York takes it further:
If there’s a pattern of violations, the Attorney General can pursue fines of up to $25,000
These laws are designed to help freelancers—but if you’re on the hiring side, they also create serious legal and financial risk if you’re not following protocol.
What You Should Do Right Now
Review your freelancer relationships
Who are you working with?
Do they fall into one of the covered states?
Are you meeting the payment thresholds?
Use a written agreement every time
Even if not required by law, it protects you.
Include scope of work, payment terms, and deadlines.
Store your contracts properly
Keep them for at least 6 years (to be safe).
Document everything
If there’s a dispute about faulty work, you’ll need proof.
Need Help?
We’ve created a plug-and-play freelance contract template that meets the requirements in all three states. If you need it, just contact us and we’ll send it your way.
At Quartermaster Tax, we help small businesses stay compliant while keeping more of what they earn. If you’re not sure how these laws impact your business—or you want a quick audit of your current freelance setup—reach out.
We’ve got your back.
Don’t let a $1,000 freelance invoice turn into a $20,000 legal nightmare.
Stay ahead of the curve.
Book a consultation call with us for your Tax Planning! Just CLICK HERE
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Quartermaster Tax
Helping Small Businesses Win the Tax Game