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New York City Law Imposes Additional Requirements for Companies That Contract with Freelancers
May 31st, 2017 |

New York City’s Establishing Protections for Freelance Workers Act, also known as the Freelance Isn’t Free Act, has been widely covered in the media. This law, one of the first in the nation aimed at protecting wage payment rights of freelance workers, became effective May 15, 2017.

The Freelance Isn’t Free Act imposes specific requirements on companies located in New York City that contract with freelance workers, including requiring a written freelance contract, requiring companies to pay freelancers in a timely manner and in full, prohibiting retaliation against freelancers who exercise their rights under the Freelance Law, and creating penalties against companies who fail to comply.

Who is a freelance worker?

The Freelance Law defines a freelance worker as a single person or an organization, composed of only one person, who is engaged as an independent contractor to provide services in exchange for compensation. The law does not apply to employees, to contractors that have employees, or to contractors that consist of more than one individual. The definition specifically excludes sales representatives as defined in section 191 of the New York Labor Law, licensed medical professionals, and also any individuals practicing law.

What are the specific requirements of the Freelance Law?

Any company located in New York City that contracts with a freelance worker on or after May 15, 2017, the must:

  1. Provide a written contract if the work to be performed is worth $800 or more. This includes multiple small projects performed within the same 120-day period that total up to $800 or more;
  2. Ensure that all payments to the freelancer are made in a timely manner and paid in full; and
  3. Not engage in any type of retaliatory or adverse action against freelance workers for exercising the rights granted to them under the Freelance Law.

What must be included in a written freelance contract?

For work that is worth $800 or more, the written freelance contract must include:

  1. The name and mailing address of both the hiring party and the freelance worker;
  2. An itemized list of the freelancer’s services, including the value of the service and the method of payment; and
  3. The date of the worker’s payment.

When should a freelancer be compensated?

As stated above, for work worth $800 or more, the written contract should state when and how the freelancer will be paid. However, if the contract is not specific as to time of payment then the company has up to 30 days after the completion of services rendered to furnish payment.

What happens if the Freelance Law is violated?

For statutory violations, a freelancer may file an administrative complaint with the City. The statutory damages awarded  will vary, for example a freelancer may recover $250 for a company’s failure to provide a written contract for work worth $800 or more. For failures to pay in a timely manner or in full,  and for retaliation against a freelancer, or for violations of more than one of the three provisions, a freelancer may recover damages up to the value of the contract. Freelancers may also receive double damages and injunctive relief for successful failure to pay claims. In addition, New York City may bring a civil action and recover up to $25,000 against any company found to have a pattern or practice of repeatedly violating the provisions of this law.

There is a six-year statute of limitations for claims alleging failure to make timely or full payment or retaliation. There is a two-year statute of limitations for claims alleging violation of the written contract requirement.

Complexities

Like many new laws, this one contains some ambiguities that will likely be ironed out over time. For example, it is unclear whether the law applies only to work performed in the city, or whether it also applies to contractors (or hiring parties) who reside in the city, even if the work is performed elsewhere. It is very common in legitimate independent contractor relationships that the hiring party does not know or care where the work is performed. Ironically, that important term may make it difficult to determine whether the Freelance Isn’t Free Act applies.

Another common aspect of independent contractor relationships is that the contractor, at the contractor’s discretion, can engage helpers or assistants to perform the work. Since the Act only applies if the contractor is working solo, it may be important for the engaging company to find out whether the contractor intends to use any assistants. Here again, one of the features of a properly classified independent contractor relationship — the ability to hire helpers — makes it difficult for the hiring party to know whether the Act applies.

Advice for NYC companies

New York City companies that contract with independent contractors are encouraged to determine whether any of their independent contractors fall within the law’s definition of a freelance worker. If so, they should carefully examine their contracting and payment practices to ensure compliance with the requirements outlined above in order to limit potential liability.

One significant note of caution: adherence to the Freelance Isn’t Free Act will not protect a company from the significant risk and potential liability related to worker misclassification. The law does not change any of the federal or state criteria for determining whether an individual is qualified to be classified as an independent contractor versus an employee. For companies who do not have the specialized legal expertise to make independent contractor classification decisions it is always a good idea to engage with a specialized firm like TalentWave to provide this valuable service.

Image Attribution:
Wikipedia” by New York City Department of Consumer Affairs
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