On November 16, 2016, New York City Mayor de Blasio signed into law the Freelance Isn't Free Act (No. 1017-2015) (the Act), designed to extend various new protections to freelancers, i.e., independent contractors. The Act is applicable to both nonprofit and for-profit employers in New York City. Prior to the Act's passage, independent contractors with claims for unpaid wages were left only with suits in contract as their sole means of recourse; there was no statutory basis for recovery of their unpaid wages. However, now that the Act has taken effect on May 15, 2017, independent contractors in New York have statutory guarantees to a written contract, and to timely and full payment of wages. In addition to understanding the Act's requirements and ensuring full compliance with them, nonprofit employers in New York City also should undertake a careful review of their independent contractor agreement templates.

Background

The Act, introduced in December 2015 by Brooklyn City Councilman Brad Lander, was strongly advocated for by the Freelancers Union. A 2015 survey released by the Freelancers Union noted that there are approximately 54 million freelancers in the United States, and of the 5,000 who were surveyed, 71% cited difficulty collecting payment during their careers. New York City is the first jurisdiction in the country to provide such protections to independent contractors, and other states and locales are likely to follow suit.

The Act marks a distinct change in the treatment of independent contractors. They are typically not entitled to many of the benefits employees enjoy. For example, employers are not required to provide independent contractors with workers' compensation insurance, health insurance coverage, or unpaid leave under the federal Family and Medical Leave Act. Further, independent contractors are not subject to protection under Title VII of the federal Civil Rights Act or its state and local equivalents, nor are they entitled to overtime compensation under federal and state wage and hour laws. Thus, the Act establishes additional protections for a population of individuals largely outside the reach of various employment laws.

The New Regulations

The Act has several key components which New York City employers should be aware of, including the following:

  1. When a covered party hires a freelance worker (defined as "any natural person or any organization composed of no more than one natural person…that is hired or retained as an independent contractor by a hiring party to provide services in exchange for compensation") and the contract is valued at $800 or more, that contract must be reduced to a writing which notes, among other things, the services to be provided, the value of the services, and the date of payment (or the mechanism by which the payment date will be determined). (It is unclear whether the Act applies to independent contractors outside of the City who are retained by employers located in the City, or whether it applies to independent contractors in the City who are retained by employers located outside of the City; hopefully subsequent guidance will be issued to provide clarification on the applicability of the Act.)
  2. Compensation must be paid as described under the terms of the contract or, if the contract does not provide a mechanism for determining a payment date, 30 days after the freelance worker completes his or her services under the contract.
  3. Hiring parties may not threaten, intimidate, discipline, harass, deny work opportunities to, discriminate against, or take any other action that penalizes freelance workers or is reasonably likely to deter a freelance worker from exercising or trying to exercise any right guaranteed under the Act, or from obtaining future work opportunities.
  4. Aggrieved freelance workers may file a complaint with the New York City Department of Consumer Affairs' Office of Labor Policy & Standards within two years after the acts alleged to have violated the Act took place.
  5. A freelance worker alleging a violation may bring a civil action for damages within two (for violations of section 20-928 of the Act) to six (for violations of sections 20-929 or 20-930 of the Act) years after the acts alleged to have violated the Act took place. (See sections 20-928, 20-929, and 20-930 of the Act here.)
  6. A freelance worker who prevails on a claim will be awarded damages and reasonable attorney's fees and costs. Damages may include statutory damages, double damages, injunctive relief, and "other such remedies as may be appropriate," depending on the violation alleged.
  7. Corporation Counsel of the City of New York may commence a civil action on behalf of the City where reasonable cause exists to believe that a hiring party is engaged in a pattern or practice of violations under the Act. Relief may come in the form of injunctive relief, civil penalties up to $25,000, and "any other appropriate relief." In addition, a private right of action also exists; any City-instituted action does not prevent an individual alleging a violation under the Act from bringing a civil action as well.

What This Means for Nonprofit Employers

As noted above, the Act went into effect on May 15, 2017. Since independent contractor arrangements are common among nonprofit employers, it is imperative that nonprofits in New York City review and revise their independent contractor agreement templates to ensure they meet the Act's requirements, and to otherwise ensure full compliance with the Act. As the penalties for violation of the Act are quite severe, it is important for nonprofit employers in New York City to have a compliant agreement on hand, be fully prepared to make all payments called for under the agreement, and not take any prohibited action against their independent contractors.