On November 16, 2016, New York City Mayor Bill de Blasio signed into law the Freelance Isn't Free Act (the "Act"), the first major law nationwide aimed at establishing and enhancing protections for independent contractors or "freelance workers," as they are referred to in the Act. Under the Act, which goes into effect on May 15, 2017, those who hire freelance workers must reduce their contracts to writing and pay freelance workers no later than 30 days after they have completed their services, among other requirements. The Act also creates new avenues for recovery for aggrieved freelance workers, and imposes specific penalties for violations. Passed in response to evidence that employers are increasingly engaging temporary workers for discrete projects in lieu of hiring employees, the Act is the first legislation of its kind to extend payment protections--more typically reserved for employees--to independent contractors.
This article summarizes key provisions of the Freelance Isn't Free Act and provides guidance for companies and individuals who hire freelance workers or may do so in the future.
I. Scope of the Act
The Act, which amends Title 20 of the New York City Administrative Code, defines a "freelance worker" as "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 definition contemplates that only self-employed, independent workers are protected by the law, not individuals who are employed by temporary staffing agencies. Furthermore, the law excludes from the definition of "freelance worker" sales representatives, legal practitioners in good standing, and licensed medical professionals. "Hiring party" is defined under the law as "any person who retains a freelance worker to provide any service," excluding the United States government, any New York state entity, any municipal or local government entity, or any foreign government.
II. Requirements Under the Act
The Act requires that the hiring party and freelance worker reduce to writing any single contract with a value of at least $800 or multiple contracts between the same hiring party and freelance worker for services within the immediately preceding 120 days that are valued at a minimum of $800 in the aggregate.
To demonstrate that the hiring party and freelance worker both understand their obligations under the contract, the written contract must include:
- The name and mailing address of both the hiring party and the freelance worker.
- An itemization of all services to be provided by the freelance worker, and the value of those services.
- The freelancer's rate and method of compensation.
- The date on which the hiring party must pay the freelance worker, or a mechanism by which such date will be determined. If no such date or mechanism is specified, the freelancer worker must be paid no later than 30 days after completing the services rendered under the contract. Once the terms of payment are set and the freelance worker has begun performing the services, the hiring party cannot require that the worker agree to a lesser amount as a condition of timely payment.
The Act also contains an anti-retaliation provision that prohibits hiring parties from threatening, intimidating, disciplining, harassing, denying a work opportunity to or discriminating against a freelance worker, or taking any other action that penalizes a freelance worker for exercising or attempting to exercise any right guaranteed under the Act. Hiring parties must also refrain from taking any actions that are reasonably likely to deter a freelancer worker from exercising or attempting to exercise any right guaranteed under the Act.
III. Enforcement of the Act
An aggrieved freelance worker may file a complaint with the director of the Office of Labor Standards, but the director has no enforcement power. An earlier draft of the law devised a route for administrative enforcement, but such provisions disappeared after city officials commented on the city's lack of resources, expertise, and capacity, which they claimed rendered the administration ill-equipped to properly investigate, adjudicate, and enforce claims under the Act. Instead, the Act as adopted lays out a role for the director of the Office of Labor Standards that entails facilitating communication between hiring parties and aggrieved freelance workers, helping freelance workers navigate the legal process, and performing high-level fact-gathering about alleged violations under the Act. Once either party has initiated a civil action in court or filed a claim or complaint with another administrative agency alleging a violation of the Act or breach of contract, the director has no jurisdiction over the matter.
To enforce a claim under the Act, either the hiring party or freelance worker may initiate a civil action in court. The statute of limitations for filing a claim and the relief available to aggrieved parties depends on the nature of the claim. Claims relating to violations of the writing requirement must be filed within two years of the alleged violation. Claims relating to violations of the payment and anti-retaliation provisions must be filed within six years of the alleged violation. A plaintiff who successfully establishes a violation of the writing requirement is entitled to statutory damages of $250. A plaintiff who successfully establishes a violation of the payment provisions is entitled to an award for double damages, injunctive relief and other such remedies as may be appropriate. A plaintiff who successfully establishes a violation of the antiretaliation provision is entitled to statutory damages equal to the value of the underlying contract for each violation. A plaintiff who successfully establishes a violation of the writing requirement and another provision is entitled to statutory damages equal to the value of the underlying contract. For all claims, the prevailing party is entitled to reasonable attorneys' fees and costs.
The Act also establishes a mechanism through which the corporation counsel may file 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 of the provisions of the Act, notwithstanding that an aggrieved individual may file his own suit based on the same facts. In any civil action alleging a pattern or practice of violations, damages are capped at $25,000 and are to be paid into the general fund of the city.
Finally, the law does not preempt or displace any other basis for relief for freelance workers, who may still bring a breach of contract or other claims.
IV. Other Provisions
The law entails that the director of the Office of Labor Standards will set up a navigation program that will provide parties who file a Complaint with the director information and non-legal assistance that will help them navigate the legal process. The director is to make available model contracts on the website of the office for use by the general public at no cost. Such model contracts shall be made available in English and in the six languages most commonly spoken by limited English proficient individuals in the city as determined by the department of city planning.
V. Advice for Employers
The Freelance Isn't Free Act will go into effect on May 15, 2017, 180 days after the Mayor's signature, and will only apply to contracts entered into on or after that date. In advance of this date, New York City employers should review any form independent contractor agreements for compliance with the new requirements. While the Act is a New York City law, employers outside of New York City may also be prudent to engage in this review, as some freelancers who live in New York City may argue that they are protected by the Act even when providing services for hiring parties outside of New York City.
Employers should also be aware that the Act grants the director of the Office of Labor Standards authority to impose additional requirements. Although the Office of Labor Standards is not yet operating and a director remains to be appointed, employers should remain abreast of any developments as the effective date of the Act approaches.
* Marissa Flood also contributed to the drafting of this article.