California Consulting Services Agreement

CALIFORNIA CONSULTING SERVICES AGREEMENT

Governed by California Law — Addressing AB 5, Non-Compete Prohibition, and CCPA/CPRA

CALIFORNIA-SPECIFIC NOTICE

This Agreement is governed by California law and incorporates the following critical California requirements:

• INDEPENDENT CONTRACTOR CLASSIFICATION (AB 5 / ABC TEST): California Labor Code § 2775 (codifying Dynamex Operations West, Inc. v. Superior Court (2018) 4 Cal.5th 903) requires that a worker is presumed an employee unless the hiring entity demonstrates all three prongs of the "ABC test": (A) the worker is free from the control and direction of the hiring entity; (B) the worker performs work outside the usual course of the hiring entity's business; and (C) the worker is customarily engaged in an independently established trade, occupation, or business. Certain professional services may be exempt under Cal. Lab. Code § 2778 (the Borello test applies instead), but exemption eligibility must be individually assessed.

• NON-COMPETE PROHIBITION (Bus. & Prof. Code § 16600): California prohibits post-contract non-compete restrictions. Any provision restricting Consultant from engaging in a lawful profession, trade, or business is void. Under § 16600.5 (effective Jan. 1, 2024), this prohibition applies regardless of where the contract was signed or where employment was maintained.

• NON-SOLICITATION LIMITATIONS: California courts have extended § 16600 to invalidate employee non-solicitation covenants in certain circumstances. Non-solicitation provisions in this Agreement are narrowly drafted.

• CCPA/CPRA (Civ. Code § 1798.100 et seq.): If Consultant processes Personal Information of California residents on behalf of Client, Consultant acts as a "Service Provider" subject to CCPA/CPRA restrictions.

• California Trade Secrets Act (Civ. Code § 3426 et seq.): Provides the framework for protecting proprietary information; injunctive relief and exemplary damages are available for misappropriation.

• 4-year statute of limitations for written contract claims (Cal. Code Civ. Proc. § 337).

AGREEMENT

This California Consulting Services Agreement ("Agreement") is entered into as of [__/__/____] ("Effective Date") by and between:

CLIENT:
Name: [________________________________]
Entity Type: [________________________________]
State of Formation: [________________________________]
Principal Address: [________________________________]

CONSULTANT:
Name: [________________________________]
Entity Type: [________________________________] (☐ Individual/Sole Proprietor ☐ Corporation ☐ LLC ☐ Partnership)
State of Formation: [________________________________]
Principal Address: [________________________________]
CA Business License No. (if applicable): [________________________________]

(each a "Party" and together, the "Parties")

RECITALS

A. Client desires to engage Consultant to perform professional consulting services.

B. Consultant represents that it is an independently established business with the expertise and qualifications to perform the Services.

C. The Parties intend that Consultant perform the Services as an independent contractor, not an employee, and that this relationship satisfy the requirements of California law, including the ABC test under Cal. Lab. Code § 2775 or the applicable exemption under Cal. Lab. Code § 2778.

D. The Parties acknowledge that California Business and Professions Code § 16600 prohibits restrictions on Consultant's right to engage in any lawful profession, trade, or business.

ARTICLE 1 — DEFINITIONS

"ABC Test" means the test codified at Cal. Lab. Code § 2775, derived from Dynamex Operations West, Inc. v. Superior Court (2018) 4 Cal.5th 903, under which a worker is an employee unless the hiring entity proves all three conditions (A), (B), and (C).

"Applicable Law" means all California and federal statutes, regulations, and ordinances, including the California Labor Code, Civil Code, Business and Professions Code, and Revenue and Taxation Code.

"Change Order" means a written amendment to a Statement of Work signed by both Parties.

"Confidential Information" means non-public information designated as confidential or reasonably understood to be confidential, including business plans, customer lists, proprietary methodologies, financial data, and trade secrets.

"Deliverables" means all reports, analyses, software, work product, and materials to be delivered by Consultant under a Statement of Work.

"Personal Information" has the meaning set forth in Cal. Civ. Code § 1798.140(v).

"Services" means the consulting services described in the Statement of Work attached as Exhibit A.

"Statement of Work" or "SOW" means a document specifying Services, Deliverables, timeline, milestones, and Fees, executed by both Parties and attached to this Agreement.

"Term" has the meaning set forth in Section 4.1.

ARTICLE 2 — INDEPENDENT CONTRACTOR STATUS (CALIFORNIA AB 5 COMPLIANCE)

2.1 Independent Contractor Relationship. Consultant is an independent contractor, not an employee of Client. Nothing in this Agreement creates an employment, agency, partnership, or joint venture relationship. Consultant has no authority to bind Client except as expressly provided herein.

2.2 ABC Test Compliance. The Parties intend that this engagement satisfy the ABC test under Cal. Lab. Code § 2775 or qualify for a professional services exemption under Cal. Lab. Code § 2778. Specifically:

(a) Prong A — Freedom from Control. Client retains Consultant for the results to be achieved, not the manner of achieving them. Consultant controls the time, place, and method of performing the Services. Client shall not dictate Consultant's work hours, work location, or sequence of tasks.

(b) Prong B — Outside Usual Course of Business. The Services are outside the usual course of Client's business, OR Consultant qualifies for an exemption under Cal. Lab. Code § 2778 because:

☐ The Services are professional services (e.g., marketing, human resources administration, graphic design, travel agent services, payment processing, consulting) enumerated in Cal. Lab. Code § 2778(b), AND Consultant satisfies the Borello factors; OR

☐ The Services are performed by a bona fide business-to-business contracting entity under Cal. Lab. Code § 2776.

(c) Prong C — Independently Established Business. Consultant is customarily engaged in an independently established trade, occupation, or business of the same nature as the Services. Evidence includes:

☐ Consultant maintains a business license
☐ Consultant has its own clients/customers besides Client
☐ Consultant has its own business location
☐ Consultant advertises its services to the general public
☐ Consultant provides its own tools and equipment

2.3 Tax Obligations. Consultant is solely responsible for all federal, California, and local tax obligations, including:
(a) Federal and California income taxes;
(b) Self-employment tax (Social Security and Medicare);
(c) California Employment Development Department (EDD) obligations, if any;
(d) California franchise tax or LLC fee, as applicable.

Client shall not withhold taxes from payments to Consultant. Client shall issue IRS Form 1099-NEC for payments of $600 or more in a calendar year.

2.4 No Employee Benefits. Consultant is not entitled to any Client employee benefits, including health insurance, retirement plans, paid time off, or workers' compensation coverage.

2.5 Workers' Compensation. If Consultant has employees, Consultant shall maintain workers' compensation insurance as required by Cal. Lab. Code § 3700. If Consultant is a sole proprietor with no employees, Consultant acknowledges that Client's workers' compensation policy does not cover Consultant.

ARTICLE 3 — SCOPE OF SERVICES

3.1 Engagement. Client engages Consultant, and Consultant accepts, to perform the Services described in the SOW.

3.2 Professional Standards. Consultant shall perform the Services in a professional and workmanlike manner consistent with the standard of care exercised by professionals performing similar services in California.

3.3 Changes to Scope. Material changes require a written Change Order signed by both Parties.

3.4 Consultant's Personnel. Consultant may use its own employees or subcontractors to perform the Services, provided that: (a) Consultant remains responsible for their performance; and (b) subcontractors comply with the confidentiality and data privacy provisions of this Agreement.

3.5 Client Cooperation. Client shall provide reasonable access to information, personnel, and facilities necessary for Consultant to perform the Services.

ARTICLE 4 — TERM AND TERMINATION

4.1 Term. This Agreement commences on the Effective Date and continues until the earlier of: (a) completion of all Services under all SOWs; or (b) termination under this Article 4 ("Term").

4.2 Termination for Convenience. Either Party may terminate this Agreement or any SOW on [____] days' written notice.

4.3 Termination for Cause. Either Party may terminate immediately upon written notice if:
(a) The other Party materially breaches and fails to cure within [____] days after notice; or
(b) The other Party becomes insolvent, files for bankruptcy, or has a receiver appointed.

4.4 Termination for Misclassification Risk. If either Party reasonably determines that the independent contractor relationship may not satisfy the ABC test or applicable exemption under California law, either Party may terminate on [____] days' notice without liability for such termination, subject to payment for Services already performed.

4.5 Effect of Termination.
(a) Consultant shall cease Services, deliver all completed and in-progress Deliverables, and return or destroy Client's Confidential Information;
(b) Client shall pay Consultant for all Services performed and approved expenses incurred through the termination date;
(c) Sections 2.3, 5.4, 6, 7, 8, 9, 10, and 11 survive termination.

ARTICLE 5 — COMPENSATION

5.1 Fees. Client shall pay Consultant the Fees set forth in the SOW:

☐ Time and materials at $[________________________________] per hour / $[________________________________] per day
☐ Fixed fee of $[________________________________] for the project
☐ Monthly retainer of $[________________________________]
☐ Milestone-based per the SOW payment schedule

5.2 Expenses. Client shall reimburse pre-approved, reasonable out-of-pocket expenses with receipts.

5.3 Invoicing and Payment. Consultant shall invoice Client [☐ monthly / ☐ upon milestone completion / ☐ upon project completion]. Client shall pay undisputed invoices within [____] days of receipt.

5.4 Late Payment Interest. Overdue amounts accrue interest at [____]% per month, not to exceed the maximum rate under Cal. Const. Art. XV, § 1 (the greater of 10% per annum or the Federal Reserve Bank of San Francisco discount rate plus 5%).

5.5 Taxes. Fees exclude all applicable sales, use, and similar taxes. Consulting services are generally not subject to California sales tax (services are not tangible personal property). However, if any component involves transfer of tangible personal property, applicable sales tax shall be separately stated.

ARTICLE 6 — INTELLECTUAL PROPERTY

6.1 Pre-Existing IP. Each Party retains all rights in materials, software, data, or technology owned prior to the Effective Date ("Pre-Existing IP").

6.2 Work Product Assignment. Upon full payment of all Fees, Consultant assigns to Client all right, title, and interest in the Deliverables (excluding Consultant's Pre-Existing IP and Reserved IP). Consultant shall execute all documents reasonably necessary to perfect this assignment, including California-specific intellectual property assignment instruments.

6.3 License to Pre-Existing IP. Consultant grants Client a perpetual, worldwide, royalty-free, non-exclusive license to use Consultant's Pre-Existing IP solely as incorporated in the Deliverables.

6.4 Reserved IP. Consultant retains rights in generic methodologies, frameworks, know-how, and tools developed or used in performing the Services that are not specific to Client ("Reserved IP").

6.5 California Labor Code § 2870 — Invention Assignment Limitation. If Consultant is an individual, to the extent Cal. Lab. Code § 2870 applies, this Agreement does NOT require assignment of any invention that Consultant developed entirely on their own time without using Client's equipment, supplies, or trade secret information, unless the invention relates to Client's business or reasonably anticipated research.

6.6 No Non-Compete on IP. Per Cal. Bus. & Prof. Code § 16600, nothing in this Article prevents Consultant from developing similar work product for other clients, provided Consultant does not use Client's Confidential Information.

ARTICLE 7 — CONFIDENTIALITY AND TRADE SECRETS

7.1 Obligations. The Receiving Party shall: (a) protect Confidential Information with at least reasonable care; (b) use it solely to perform under this Agreement; and (c) disclose it only to personnel with a need to know who are bound by comparable obligations.

7.2 California Trade Secrets Act. Information qualifying as a "trade secret" under Cal. Civ. Code § 3426.1 is protected indefinitely. Misappropriation may result in injunctive relief, actual damages (including unjust enrichment), and exemplary damages up to twice the actual damages for willful and malicious conduct (Cal. Civ. Code § 3426.3).

7.3 Duration. Non-trade-secret confidentiality obligations survive for [____] years after termination.

7.4 Exclusions. Standard exclusions apply: publicly available information, independently developed information, information received from a non-restricted third party, and disclosures required by California law or court order (with prompt notice).

7.5 Return/Destruction. Upon termination, each Party shall return or certify destruction of the other's Confidential Information within [____] days.

ARTICLE 8 — DATA PRIVACY (CCPA/CPRA COMPLIANCE)

8.1 Applicability. This Article 8 applies if Consultant processes Personal Information of California residents on behalf of Client.

8.2 Service Provider Status. Consultant acts as a "Service Provider" under Cal. Civ. Code § 1798.140(ag) and shall:
(a) Process Personal Information only for the business purposes specified in the SOW;
(b) Not sell or share Personal Information (as defined in the CCPA/CPRA);
(c) Not retain, use, or disclose Personal Information for any purpose other than providing the Services;
(d) Notify Client if Consultant can no longer meet its CCPA/CPRA obligations;
(e) Cooperate with Client's obligations regarding consumer requests (know, delete, correct, opt-out);
(f) Implement reasonable security procedures (Cal. Civ. Code § 1798.81.5);
(g) Provide annual compliance certifications.

8.3 Data Breach Notification. Consultant shall notify Client within [____] hours of discovering any breach of security involving Personal Information, consistent with Cal. Civ. Code § 1798.82.

8.4 Subcontractor Flow-Down. Consultant shall not engage subcontractors to process Personal Information without Client's prior written consent and shall impose equivalent CCPA/CPRA obligations.

ARTICLE 9 — REPRESENTATIONS AND WARRANTIES

9.1 Mutual Representations. Each Party represents that:
(a) It is duly organized and in good standing (or, for individuals, legally competent);
(b) It has full authority to enter into this Agreement; and
(c) Performance will not violate any existing obligation.

9.2 Consultant Warranties.
(a) The Services will be performed in a professional manner consistent with California industry standards;
(b) Deliverables will materially conform to the SOW requirements;
(c) Consultant will not knowingly infringe third-party intellectual property rights;
(d) Consultant and its personnel possess requisite skill and qualifications;
(e) Consultant is an independently established business and the engagement satisfies California's independent contractor requirements.

9.3 Disclaimer. EXCEPT FOR EXPRESS WARRANTIES IN THIS AGREEMENT, NEITHER PARTY MAKES ANY OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.

ARTICLE 10 — NON-COMPETE AND NON-SOLICITATION (CALIFORNIA-SPECIFIC)

10.1 No Non-Compete. Consistent with Cal. Bus. & Prof. Code § 16600 and § 16600.5:

(a) This Agreement does not and shall not restrict Consultant from engaging in any lawful profession, trade, or business during or after the Term.

(b) This Agreement does not and shall not restrict Consultant from performing services for Client's competitors.

(c) Any provision of this Agreement that is determined to violate § 16600 is void and severable.

(d) Under § 16600.5 (effective January 1, 2024), this prohibition applies regardless of where this Agreement was signed or where the Services are performed.

10.2 Limited Non-Solicitation. During the Term and for [____] months thereafter, neither Party shall directly solicit for employment any employee of the other Party who was materially involved in the Services, except through general job postings or unsolicited inquiries.

IMPORTANT CALIFORNIA NOTE: California courts have held that employee non-solicitation agreements may violate Bus. & Prof. Code § 16600 where they effectively restrain competition. The non-solicitation provision above is narrowly drafted but its enforceability under California law is uncertain. See AMN Healthcare, Inc. v. Aya Healthcare Services, Inc. (2018) 28 Cal.App.5th 923.

10.3 Client Non-Solicitation of Consultant's Personnel. During the Term and for [____] months thereafter, Client shall not directly solicit or hire Consultant's employees or subcontractors who performed Services under this Agreement without Consultant's written consent, except through general job postings.

ARTICLE 11 — INDEMNIFICATION AND RISK ALLOCATION

11.1 Mutual Indemnification. Each Party (as "Indemnifying Party") shall indemnify the other Party from third-party claims arising from:
(a) Bodily injury or property damage caused by Indemnifying Party's negligence or willful misconduct;
(b) Breach of representations, warranties, or covenants;
(c) Violation of Applicable Law.

11.2 Consultant IP Indemnity. Consultant shall additionally indemnify Client against claims alleging that Deliverables infringe U.S. intellectual property rights.

11.3 Limitation of Liability. EXCEPT FOR: (a) BREACH OF CONFIDENTIALITY OR DATA PRIVACY OBLIGATIONS; (b) INDEMNIFICATION OBLIGATIONS; OR (c) GROSS NEGLIGENCE OR WILLFUL MISCONDUCT, NEITHER PARTY'S AGGREGATE LIABILITY SHALL EXCEED $[________________________________] (OR [____] TIMES THE TOTAL FEES PAID OR PAYABLE UNDER THIS AGREEMENT).

NEITHER PARTY SHALL BE LIABLE FOR INDIRECT, INCIDENTAL, CONSEQUENTIAL, SPECIAL, OR PUNITIVE DAMAGES, INCLUDING LOST PROFITS.

11.4 Insurance. Consultant shall maintain during the Term:
(a) Commercial General Liability: $[________________________________] per occurrence / $[________________________________] aggregate;
(b) Professional Liability (E&O): $[________________________________] per claim;
(c) Cyber/Privacy Liability: $[________________________________] (if processing Personal Information);
(d) Workers' Compensation: as required by Cal. Lab. Code § 3700 (if Consultant has employees);
(e) Commercial Auto: as required if Consultant uses vehicles in performing Services.

Policies shall be with California-admitted carriers. Client shall be named as additional insured on CGL policy upon request.

11.5 Force Majeure. Neither Party is liable for delays beyond reasonable control, including California state emergencies, earthquakes, wildfires, and government orders.

ARTICLE 12 — DISPUTE RESOLUTION

12.1 Governing Law. This Agreement is governed by the laws of the State of California, including the California Civil Code, California Labor Code, and California Business and Professions Code, without regard to conflict-of-laws principles. NOTE: Under Cal. Lab. Code § 925, if Consultant is an individual primarily residing and working in California, Client may not require adjudication in another state or application of another state's law as a condition of employment; while this is an independent contractor agreement, the Parties acknowledge this California policy.

12.2 Exclusive Forum. The Parties submit to the exclusive jurisdiction of the California Superior Court for the County of [________________________________] and the United States District Court for the [________________________________] District of California.

12.3 Arbitration (Optional).

☐ Elected. Disputes shall be resolved by binding arbitration in [________________________________], California, administered by [________________________________]. California substantive law applies. Discovery per Cal. Code Civ. Proc. § 1283.05. The arbitrator shall issue a reasoned, written award.

☐ Not Elected. Section 12.2 governs.

12.4 Jury Trial Waiver. EACH PARTY KNOWINGLY AND VOLUNTARILY WAIVES THE RIGHT TO TRIAL BY JURY TO THE FULLEST EXTENT PERMITTED BY CALIFORNIA LAW.

12.5 Prevailing Party Fees. Per Cal. Code Civ. Proc. § 1717, the prevailing party is entitled to reasonable attorney fees, costs, and expenses.

12.6 Injunctive Relief. Either Party may seek injunctive relief in California Superior Court to protect Confidential Information, trade secrets, or intellectual property, without posting bond.

12.7 Statutes of Limitation.

• Written contract: 4 years (Cal. Code Civ. Proc. § 337)
• Oral contract: 2 years (Cal. Code Civ. Proc. § 339)
• Fraud: 3 years (Cal. Code Civ. Proc. § 338(d))
• Trade secret misappropriation: 3 years (Cal. Civ. Code § 3426.6)

ARTICLE 13 — GENERAL PROVISIONS

13.1 Entire Agreement. This Agreement, including all SOWs and Exhibits, is the entire agreement and supersedes all prior understandings.

13.2 Amendment. Amendments require a writing signed by both Parties.

13.3 Assignment. Neither Party may assign without the other's written consent, except to a successor by merger or acquisition, provided the assignee assumes all obligations.

13.4 Severability. Invalid provisions shall be reformed to the minimum extent necessary. If any non-compete provision is found to violate Cal. Bus. & Prof. Code § 16600, it is void and severable without affecting the remainder.

13.5 Notices. Written notices by personal delivery, certified mail (return receipt requested), or overnight courier. Effective upon receipt or refusal.

13.6 Electronic Signatures. Valid under Cal. Civ. Code § 1633.1 et seq. (CUETA) and the federal ESIGN Act.

13.7 Counterparts. This Agreement may be executed in counterparts.

13.8 No Third-Party Beneficiaries. Except as provided in the indemnification provisions, no person other than the Parties has rights under this Agreement.

13.9 Interpretation. Headings are for convenience. "Including" means "including without limitation." Ambiguities not construed against the drafter.

EXECUTION

IN WITNESS WHEREOF, the Parties have executed this California Consulting Services Agreement as of the Effective Date.

CLIENT:

Signature: [________________________________]
Printed Name: [________________________________]
Title: [________________________________]
Date: [__/__/____]

CONSULTANT:

Signature: [________________________________]
Printed Name: [________________________________]
Title: [________________________________]
Date: [__/__/____]

EXHIBIT A — STATEMENT OF WORK (SOW)

SOW Number: [________________________________]
Project Name: [________________________________]

1. Description of Services:
[________________________________]

2. Deliverables:

3. Timeline / Milestones:
[________________________________]

4. Fees and Payment Schedule:

5. Key Personnel:
[________________________________]

6. Client Responsibilities:
[________________________________]

EXHIBIT B — CHANGE ORDER TEMPLATE

Change Order No.: [________________________________]
Date: [__/__/____]
SOW Reference: [________________________________]
Description of Change: [________________________________]
Impact on Fees: $[________________________________]
Impact on Timeline: [________________________________]

Client Signature: [________________________________] Date: [__/__/____]
Consultant Signature: [________________________________] Date: [__/__/____]

EXHIBIT C — AB 5 / INDEPENDENT CONTRACTOR COMPLIANCE CHECKLIST

The following factors support independent contractor status under California law:

☐ Consultant is free from Client's control and direction in performing Services (Prong A)
☐ Services are outside Client's usual course of business, OR Consultant qualifies for a Cal. Lab. Code § 2778 exemption (Prong B)
☐ Consultant is customarily engaged in an independently established trade or business (Prong C)
☐ Consultant maintains its own business license
☐ Consultant provides services to other clients
☐ Consultant uses its own tools and equipment
☐ Consultant sets its own hours and work location
☐ Consultant has the ability to hire its own employees/subcontractors
☐ Consultant has its own business insurance
☐ Consultant invoices for services rather than receiving a regular salary
☐ The engagement has a defined scope and endpoint

Sources and References

• California Labor Code § 2775 (AB 5 / ABC Test): https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?lawCode=LAB&sectionNum=2775.
• California Labor Code § 2778 (Professional Services Exemption): https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?lawCode=LAB&sectionNum=2778.
• Dynamex Operations West, Inc. v. Superior Court (2018) 4 Cal.5th 903: https://law.justia.com/cases/california/supreme-court/2018/s222732.html
• Cal. Bus. & Prof. Code § 16600 (Non-Compete Ban): https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?lawCode=BPC&sectionNum=16600.
• Cal. Bus. & Prof. Code § 16600.5 (Expanded Non-Compete Ban): https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?lawCode=BPC&sectionNum=16600.5.
• AMN Healthcare v. Aya Healthcare (2018) — Non-Solicitation: https://law.justia.com/cases/california/court-of-appeal/2018/d073062.html
• CCPA/CPRA (Cal. Civ. Code § 1798.100 et seq.): https://oag.ca.gov/privacy/ccpa
• California Trade Secrets Act (Cal. Civ. Code § 3426): https://leginfo.legislature.ca.gov/faces/codes_displayText.xhtml?lawCode=CIV&division=4.&title=5.&part=1.
• Cal. Lab. Code § 2870 (Invention Assignment Limitation): https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?lawCode=LAB&sectionNum=2870.
• Cal. Lab. Code § 925 (Choice of Forum/Law for CA Employees): https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?lawCode=LAB&sectionNum=925.
• California Usury Law (Const. Art. XV): https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?lawCode=CONS&sectionNum=SECTION+1.&article=XV