Classification and Compliance Updates

LS&Co. is implementing updated classification and compliance protocols across all studio, campaign, and project work in the creative marketing space.

These updates redefine how certain roles must be engaged and introduce a formal vetting process for freelance workers.

All protocol updates are mandatory requirements set by the LS&Co. Legal and Risk Management teams, and cannot be bypassed. However, the OOTB team will support and guide you through every step so the transition is smooth, clear, and fully compliant.

The good news:

You are no longer responsible for determining how a worker should be classified. With these new protocols:

  • Classification is no longer your burden.

  • Every team member is insured, whether they are employees or independent contractors.

  • OOTB handles all compliance, onboarding, contracts, and payments so you can focus on production.

Why is this happening?

These new protocols are designed to:

  • Align the process of hiring temporary marketing workers with employment law standards, mitigate risk, protect intellectual property rights, and ensure proper vetting of contingent workers.

  • Reduce LS&Co.’s legal exposure for misclassification.

  • Standardize the engagement of creative and support talent.

  • Ensure that all workers are properly classified, insured, and paid in accordance with state and federal standards.

While these updates will introduce a few new steps for your team, the long-term goal is to increase clarity and protection for both LS&Co. and the people you work with.

How OOTB will support you

The OOTB team will be with you every step of the way!

  • We will proactively communicate with workers to keep IC Vetting, onboarding, and contracting on track.

  • If there are outstanding items, you will receive email notifications about all individuals who have not completed onboarding or contracts before their first day of work. We will need you to make sure they step aside and complete these tasks before beginning work.

  • All paperwork can be completed via our mobile-friendly platforms, and we are always available to assist.

Understanding worker classifications:

W-2 Employee

  • Definition:

    A worker who is engaged through OOTB (acting as the Employer of Record) on behalf of LS&Co. and treated as an employee under local, state, and federal labor laws.

  • Taxes:

    OOTB withholds employee payroll taxes. OOTB also pays and submits the required employer payroll taxes.

  • Insurance:

    OOTB’s insurance policies cover employees for Workers’ Compensation, General Liability, and Employment Practices Liability insurance.

  • Benefits:

    Employees are eligible for mandated benefits, such as sick leave, breaks, paid sick time, and other statutory protections.

  • Payment terms:

    Employees submit their time via timecards and are paid weekly.

Independent Contractor (IC)

  • Definition:

    An individual or small business that provides services independently to the general public and is not classified as a W-2 employee. ICs must pass LS&Co. IC vetting requirements.

  • Contracts:

    OOTB will execute an LS&Co.-mandated contract for every IC engagement to align with the requirements of the California Freelance Worker Protection Act.

  • Taxes:

    ICs are responsible for reporting and paying their own taxes.

  • Insurance:

    ICs must maintain and provide proof of required insurance coverage.

  • Benefits:

    ICs are not eligible for benefits through OOTB.

  • Payment terms:

    ICs submit invoices to receive payment. Payment terms depend on provider type.

    General ICs are paid within 10 business days of OOTB receiving their final invoice AND LS&Co.’s approval of that invoice.

    Model ICs are paid within 10 business days after the end of the project.

Third-Party Service Provider

  • Definition:

    A business that provides services independently to the general public and has five or more full-time employees. TPSPs must receive approval from the LS&Co. Global Strategic Sourcing team before OOTB can process payment.

  • Taxes:

    TPSPs are responsible for reporting and paying their own taxes.

  • Payment terms:

    TPSPs submit invoices to receive payment. They are paid within 30 days of OOTB receiving the final invoice AND LS&Co.’s approval of that invoice.

Engagement and classification pathways by category of worker:

Each category of worker must follow a specific engagement pathway based on LS&Co. legal standards.

Support-Tier Job Roles: W-2 Payroll Only

(e.g., PAs, Tailors, Assistants, Coordinators)

  • Support-tier job roles do not meet AB5’s standards for ICs and must be classified as W-2 employees.

  • If a support-tier worker is represented by an agency that does not manage them through payroll, they must be managed through OOTB payroll.

Creative Freelancers: IC Vetting Required

(e.g., Photographers, Stylists, Art Directors)

  • Potential ICs must meet legal and risk standards and provide business documentation and proof of insurance. If they are unable to meet LS&Co. IC vetting requirements, they must be engaged as an employee.

Model Talent: ICs

  • Models must have an executed model agreement on file before work begins.

  • No additional vetting is required.

  • Models are paid as ICs directly by OOTB within 10 business days after the end of the project.

  • Agency fees, commissions, and usage are paid directly to the agency within 30 days of OOTB receiving the invoice from the agency.

Agency-Represented Creatives and Personnel: Subject to Verification

  • Workers in support-tier job roles who are represented by an agency must be paid as W-2 employees, either by their agency or through OOTB.

  • All other agency-represented creatives must complete the IC Vetting process and meet LS&Co. requirements. If they do not qualify as ICs, they must be paid via payroll through OOTB or their agency.

  • Agencies that manage their creatives through W-2 payroll must provide proof of employment and proof of insurance.

  • Agencies will be paid within 30 days of OOTB receiving their final invoice AND LS&Co.’s approval of that invoice.

Third-Party Service Providers (TPSPs): Sourcing Approval Required

  • Business-to-business service providers that have five or more full-time employees are subject to Global Strategic Sourcing approval before payment.

What is IC Vetting, and who must go through it?

Any freelancer who is not a model or in a support-tier job role must complete the IC Vetting process and meet LS&Co. requirements to be considered for payment as a 1099 independent contractor. OOTB administers the process to determine whether the freelancer can be compliantly engaged as an IC.

To pass IC Vetting and be compensated as an IC, a freelancer must:

  • Pass a classification survey to ensure they meet AB5 requirements and the risk mitigation standards defined by LS&Co.

  • Operate as an independent business (Sole Prop, LLC, or Corp).

  • Provide proof of general liability and workers’ compensation insurance.

  • Sign a contract issued by OOTB on behalf of LS&Co.

If a freelancer does not pass IC Vetting, they must be paid via W-2 payroll.

Important guidance for managers:

LS&Co. managers and producers should not advise or encourage workers to purchase insurance prior to completing the IC Vetting process. Many individuals will likely not meet the legal standards for IC classification and will ultimately be engaged as W-2 employees. In these cases, securing insurance would result in unnecessary out-of-pocket costs for the worker.

If a worker passes the vetting process but does not yet carry valid insurance, they will be provisionally approved. They must then secure the required insurance coverage and provide proof of insurance prior to their first day of work.

Learn more about IC Vetting

Do agency-represented creatives and crew need to go through IC Vetting?

All agency-represented creatives and crew who are not in a support-tier role (which automatically default to classification as employees) or are not managed by their agency’s internal payroll must complete IC Vetting.

  • If they pass IC Vetting, they can be engaged as ICs and will be paid directly by their agency.

  • If they do not pass, they will be onboarded to OOTB payroll. The agency will be paid directly for commission and applicable agency fees.

  • If an agency manages personnel through its own payroll, OOTB requires proof of payroll (such as paystubs or payroll reports). Once verified, the worker may remain on the agency’s payroll. The agency invoices OOTB directly for wages and related fees.

Freelancers who have done previous work for LS&Co. and were classified as W-2 employees CANNOT be re-engaged as an IC during the same calendar year.

If a freelancer wants to be considered for IC classification for future projects, they must:

  1. Have a job role that can be considered for IC classification, as outlined by LS&Co. requirements.

  2. Submit a request to OOTB to transition to IC classification.

  3. Work primarily in lead-tier job roles at the time of evaluation.

  4. Meet all LS&Co. IC vetting requirements.

Example: A photographer who was paid as a W-2 employee through OOTB in 2025 requests to transition to IC classification in 2025. However, they will not be eligible to go through the IC Vetting process until their first project in 2026. If they meet all LS&Co. IC vetting requirements, they will transition to classification as an IC. If they do not meet the requirements, they will continue to be classified as an employee.

Can a W-2 employee request to become an independent contractor?

“Cool-off” period requirements for previous LS&Co. direct employees

Any individuals who were previously engaged as W-2 employees directly by LS&Co. must meet the following “cool-off” requirements before being eligible for engagement through OOTB:

  • A minimum of 6 months has passed since their first day of paid work as a W-2 employee engaged directly by LS&Co.

  • The work to be conducted is not within the same calendar year as their last day of paid work as a W-2 employee engaged directly by LS&Co.

Support tier roles that default to employee classification:

The following is a non-exhaustive list of support tier roles that must now be engaged as W-2 employees:

  • Production Assistants/Coordinators

  • Photo Assistants

  • Tailors/Seamstresses

  • Merchandise Coordinators

  • Assistant Stylists

  • Assistant Editors

  • Assistant Directors

  • Gaffer Assistants

  • Studio Coordinators

  • Drivers

  • Swing/Grip

  • Digital Techs

  • Key Grip/Best Boy

Models: New Requirements

All models must now have an executed model agreement on file before their first day of work. Your team must add usage terms in the OOTB Portal at the time of confirmation so OOTB can issue an accurate agreement.

Once model details are confirmed, OOTB will facilitate the execution of this agreement. You can access model agreements in your OOTB Portal.

Payment Timing:

  • Models are paid directly by OOTB within 10 business days after the project ends.

  • Agency fees, talent commissions, travel, per diems, and usage fees are paid directly to the agency within 30 days of OOTB receiving their invoice.

Photographers: New Requirements

All photographers must now have an executed photographer agreement on file before their first day of work. You will be prompted to confirm shoot dates and expected delivery dates in the OOTB Portal so OOTB can issue an accurate agreement.

Once photographer details are confirmed, OOTB will facilitate the execution of this agreement. You can access photographer agreements in your OOTB Portal.

Third-Party Service Providers: Sourcing Approval Required

TPSPs operate a business with five or more full-time employees. TPSPs should work directly with LS&Co. and not receive payment through OOTB. We are outlining a process for exceptions below. LS&Co. Global Strategic Sourcing must approve any instances of a TPSP being paid via OOTB.

Once a vendor has been identified as a TPSP during the intake process, OOTB will request that you provide:

  • A clear explanation of why the TPSP is being routed through OOTB.

  • Additional context, such as timing needs, the nature of services rendered, or production workflow requirements.

OOTB will pass your responses to LS&Co. Global Strategic Sourcing to facilitate the request to proceed with payment.

Rules to remember to make the process as smooth as possible

Entering Crew/Talent:

  • Please confirm crew/talent with as much notice as possible. All crew/talent should be submitted at least 4 business days before the start date of the project to allow for vetting and onboarding.

  • Please enter accurate pay rates in your estimate.

    Every W-2 employee in California must receive a Pay Rate Notice (PRN) that outlines their hourly and overtime rates (OOTB takes care of compliantly converting day rates) before their first day of work. OOTB issues PRNs based on the pay rate entered in your estimate. If the rate is entered incorrectly, the PRN must be corrected and reissued.

    When you enter an independent contractor rate in your estimate, it is used to draft the IC agreement and becomes the contractual pay terms for that worker. To avoid errors or delays, it is essential to enter accurate IC rates.

  • Important: W-2 employee talent pay rates or schedules may not be changed within 48 hours of a project start if the change results in a lower hourly rate of pay.

Vetting and Onboarding:

  • If an individual has less than 72 hours to complete their IC vetting, or does not complete it within 72 hours of their first day of work, LS&Co. Legal requires that they be engaged as a W-2 employee by default. OOTB will notify the producer that their classification has been updated prior to their start date.

  • If an individual refuses to complete W-2 onboarding, alternate personnel must be identified. The individual is not authorized to work.

  • All individuals on W-2 payroll must complete their onboarding before starting work. They are not authorized to work until onboarding is complete.

  • Please encourage crew and talent to complete their vetting and onboarding steps ASAP.

Contracts:

  • All models and photographers must sign their contract before they are permitted to start work.

  • If a contract is not signed by the first day of work, you will receive a notification alerting you to direct the crew/talent to sign their contracts through OOTB’s mobile-friendly platform. This must be done before they can start work.

IC/Vendor Invoice Approval:

  • Invoices must be reviewed and either approved or denied within 3 business days of OOTB notifying you that they are ready for review in the OOTB Portal. If LS&Co. representatives fail to provide approval within three business days, the invoice will be deemed approved, in accordance with LS&Co. requirements.

Re-engaging Past Employees

  • Any individuals who were previously paid as employees directly by LS&Co. must meet LS&Co.’s “cool-off” criteria before being eligible for engagement through OOTB.

  • Freelancers who have done previous work for LS&Co. and were classified as W-2 employees CANNOT be re-engaged as an IC during the same calendar year.