The City of New York adopted its Freelance Isn't Free Act (Law No. 2016/140) on November 16, 2016. The new law, also known as FIFA, will take effect in New York City (NYC) on May 15, 2017. Some sources in the media have estimated that there are some 4 million freelancers in NYC, constituting an enormous workforce. Companies who rely on outside vendors for services, including accounting, visual or graphic design, website design, construction, information technology and marketing, will now need to consider auditing and changing their vendor contracting practices. The FIFA may apply even though a company may not be doing business in NYC if any of its vendors may do business in NYC.
The FIFA is designed to protect freelancers, who are defined as not only individuals, but also any company that is comprised of one individual, as long as the individual is not an attorney, licensed medical professional, or commissioned sales representative. If a company utilizes a freelancer for a project of $800 or more, or utilizes $800 worth of the same freelancer's services within a 120-day period, the company will be required to sign a written contract with the freelancer that includes all of the information required by the FIFA. The FIFA also protects the freelancer's ability to enforce his or her rights by prohibiting companies from harassing, intimidating or taking other adverse actions against freelancers in the event they do seek to enforce their rights to payment. In the event that a company fails to pay the freelancer as agreed or commits any other violation of the FIFA, the freelancer may begin administrative proceedings against the company or sue the company for double damages and attorneys' fees. These protections are similar to the protections most states, including New York, afford to outside sales representatives who earn commissions.
Since the FIFA will not take effect until May 2017, companies still have time to begin changing their vendor contracting processes.Each vendor will need to be scrutinized to determine if the vendor is located in NYC and is classified as a freelancer under FIFA. If so, companies will need to ensure that they are complying with FIFA, regardless of whether they themselves do business in NYC. Otherwise, a non-complying company may find itself facing a judgment from the courts of New York requiring payment of twice the original contract amount, as well as the unpaid vendor's attorneys' fees. This sort of result will be particularly distressing for companies that need time to negotiate with their vendors over the reasonableness of the work performed and its value. Therefore, companies will be in better shape to control the cost of outside services, if the considerations of FIFA are taken into account at the time a vendor contract is written and signed.