Executive summary: A new law regulating the hiring and payment of freelancers in New York City took effect May 15, 2017. The “Freelance Isn’t Free” Act impacts a large range of industries that routinely rely on independent contractors, including tech, media, and third-party services companies.
Who Does the Act Affect? The Act applies to any “hiring party,” which is defined broadly as “any person who retains a freelance worker to provide any service,” with an exception for government employers. The definition of “freelancer” is comprehensive: it includes “any natural person or any organization composed of no more than one natural person, whether or not incorporated or employing a trade name, that is hired or retained as independent contractor,” with a few specific exceptions such as certain sales representatives.
What Does the Act Require? There are two affirmative requirements: (1) a written contract where the value of services is more than $800 within a four-month period; and (2) timely payment based on a deadline included in the written contract or, if no date is provided, then 30 days after completion of the work. The Act requires the inclusion of specific information in the written contract, including the scope of the work. Note that the threshold $800 that triggers a written contract can be based on one contract or aggregated over a series of contracts within the previous four months.
What Does the Act Prohibit? Employers may not retaliate against freelancers based on their exercise of a right under the Act. Retaliation includes “deny[ing] a work opportunity” to the complaining freelancer.
What Damages Are Available? Aggrieved freelancers can (1) complain to New York City’s Department of Consumer Affairs’ Office of Labor Standards; or (2) file a civil action for violation of the Act. For civil actions, the statute of limitations for violation of the written contract provision is two years, while a six-year statute of limitations applies to violations of the payment and anti-retaliation provisions. Civil actions provide the following remedies:
- Written Contract Requirement. If only the written contract requirement is violated, a freelancer may recover $250 in statutory damages. If the written contract violation is in addition to other violations, then a freelancer’s recovery jumps to statutory damages in the amount of the value of the contract. Thus, for companies that deal with independent contractors who take on costly work, such as tech companies, the damages can be substantial.
- Timely Payment & Anti-Retaliation. A violation of either of these requirements can result in “double damages, injunctive relief, and other such remedies as appropriate.”
- Pattern and Practice. New York City can bring suit against hiring parties that engage in a pattern and practice of violating the Act, which can result in civil fines up to $25,000.
What Can Employers Do? Here are a few steps employers can take now to minimize their risk:
- Contracts. Assess whether you have contracts with individuals and entities that qualify as “freelancers” under the Act.
- Amount of Contracts. Evaluate whether your contracts typically exceed the $800 threshold in the four-month period.
- Location of Freelancers. For companies outside New York, determine whether any of your independent contractors work in New York City.
- Training. Educate employees who are responsible for retaining and paying independent contractors on the Act and its anti-retaliation provisions.
- Retaliation. If you stop using a freelancer, be sure to document any legitimate business reason for doing so to protect yourself from retaliation claims.
Bottom line: The “Freelance Isn’t Free” Act is broadly drafted and offers new protections for freelancers. Until more clarity is provided by the DCA or the courts, companies who hire New York City freelancers should comply. Other large cities with sizeable freelance markets may follow with similar legislation.