Beginning May 15, 2017, independent contractors in New York City will be provided with heightened protections under the law, and those engaging independent contractors will, in most instances, be legally required to do so pursuant to a written agreement. In addition, beginning October 31, 2017, New York City employers will be prohibited from asking about, relying upon or verifying a job applicant’s salary history.
New York City employers must therefore:
- Review and revise their policies, procedures and forms for engaging independent contractors;
- Review and revise their job applications and hiring policies and procedures to eliminate any prohibited inquiries about, or use of, salary history; and
- Train all those involved in the hiring process regarding the prohibited and permissible inquiries into and uses of salary history information.
NEW YORK CITY’S “FREELANCE ISN’T FREE ACT”
Employers in New York City must prepare for compliance with the Freelance Isn’t Free Act (FIFA), which takes effect May 15, 2017, establishing certain requirements for engaging “freelance workers” and penalties for noncompliance, including statutory damages, double damages, injunctive relief, and attorney’s fees.
FIFA applies only when engaging a “freelance worker”—“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 an independent contractor by a hiring party to provide services in exchange for compensation.” This means that FIFA applies whenever a person or entity engages an individual to complete a certain project or provide certain services, even when that individual uses a corporate or trade name. FIFA does not apply when a hiring party engages a vendor or a corporation comprising more than one person to provide services.
Required Written Agreement
Under FIFA, any person or entity retaining the services of an independent contractor (a hiring party) must do so pursuant to a written agreement, if the contractor will be paid $800 or more pursuant to that individual agreement or if the contractor will have been paid at least $800 during the immediately preceding six months by the same hiring party. That required written agreement must include the following information:
- The name and mailing address of both the hiring party and the independent contractor;
- An itemization of all services to be provided by the freelance worker, the value of the services to be provided pursuant to the contract and the rate and method of compensation; and
- The date on which the hiring party must pay the contracted compensation or the mechanism by which such date will be determined.
FIFA requires that independent contractors be paid on or before the date set forth in the written agreement or, if there is no payment deadline, no later than 30 days after the independent contractor completes the services. In addition, once an independent contractor has started performance of the services, the hiring party may not require as a condition of timely payment that the independent contractor accept less than the agreed-upon compensation. FIFA prohibits retaliation or discrimination against contractors from exercising or attempting to exercise their rights under the Act.
FIFA provides a complaint procedure by which independent contractors may file a complaint with the director of the Office of Labor Policy and Standards, a division of the NYC Department of Consumer Affairs, who will send a demand letter on behalf of the contractor, or file a lawsuit in court, for FIFA violations. A prevailing plaintiff is entitled to statutory damages of $250, an award for double damages, injunctive relief and other remedies “as may be appropriate.” A plaintiff is also entitled to statutory damages equal to the value of the underlying contract if the hiring party has retaliated or discriminated against the contractor. If the hiring party is reasonably believed to have engaged in a pattern or practice of FIFA violations, New York City, through the Corporation Counsel, may bring a civil action seeking a civil penalty of not more than $25,000.
Next Steps for Employers
New York City employers who engage independent contractors must familiarize themselves with this law and ensure that their independent contractor agreements are in compliance. In addition, employers must be sure to properly classify their workers as either independent contractors or employees. As previously discussed in our July 2015 Client Alert, the federal Department of Labor now takes the position that most workers are, in fact, employees, and the penalties for noncompliance are quite high.
NEW YORK CITY’S SALARY HISTORY BAN
As part of the growing movement across the country to eliminate the gender wage gap, on May 4, 2017, Mayor de Blasio signed into a law a bill making it an “unlawful discriminatory practice” for employers to inquire about the salary history of a prospective employee at any point in the hiring process, or to rely upon salary history in determining compensation. This law will take effect on October 31, 2017.
Prohibition on Inquiries About, and Consideration of, Salary History
This law amends the New York City Human Rights Law (NYCHRL) by adding a provision making it an “unlawful discriminatory practice” for an employer to inquire about a prospective employee’s salary—whether that inquiry is made to the applicant, the applicant’s former employer or any agent of the former employer—and for an employer to conduct any search for the applicant’s salary history through publicly available information.
The law defines “salary history” broadly to include not only the applicant’s salary, but also benefits and any other form of compensation.
The law also makes it an “unlawful discriminatory practice” for an employer to consider an applicant’s salary history when determining the compensation (including salary, benefits, and any other forms of compensation) for that applicant. Where an applicant has voluntarily disclosed his or her salary history, however, employers may verify and rely on such information when determining compensation.
Permissible Discussions Regarding Compensation
Employers may discuss with applicants the salary, benefits and other forms of compensation being offered and what the applicants expect. Employers are also permitted to discuss with applicants any unvested equity or deferred compensation which they might be forfeiting by leaving their current employment. And employers are permitted to ask applicants about any “objective measure” of their productivity, such as revenue, sales or other production data.
The New York City Commission on Human Rights is charged with the enforcement of the NYCHRL, including this new provision. Individuals may file a complaint for violations of the law with the Commission, which has the ability to impose civil penalties of up to $250,000 for willful and malicious violations of the law, and can award compensatory damages to victims, including emotional distress damages and other benefits. Individuals may also file a complaint for violations of the law in court, seeking the full range of relief available under the NYCHRL, including backpay, compensatory damages and attorneys’ fees.
Next Steps for Employers
Employers should review their job applications to remove any questions regarding salary history and review their hiring practices and procedures to ensure that applicants are not asked about salary histories. In addition, employers must train all those involved in the hiring process regarding what actions they may or may not take with respect to salary history pursuant to this law.