New York City Enacts Freelancer Protection Law
Diana Uhimov, May 15, 2017
On May 15, 2017, New York City’s “Freelance Isn’t Free Act” (FIFA), N.Y.C. Administrative Code §§ 20-927 et seq., went into effect, impacting companies that hire independent contractors in New York City (NYC). This is the country’s first law shielding freelancers from nonpayment and it is likely that similar laws will be passed in other states given trends in the workforce toward the “gig economy”. FIFA aims to protect freelancers from non-payment and employer retaliation for exercising their new rights.
FIFA defines a freelancer 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,” excluding certain sales representatives, legal practitioners and medical professionals. The law mandates that that employers enter into a written contract with all independent contractors retained to provide services valued at $800 or more.
The contract must set forth the services to be provided, the compensation to be paid, and the date that payment is due or the conditions that determine that date, such as completion of the task. Furthermore, the director of the newly-created Office of Labor Policy & Standards (OLPS) with the Department of Consumer Affairs (DCA) is empowered to issue regulations requiring additional contract terms. The director is also required to make sample contracts available for companies and the general public. Actions for violation of the contract requirement can be brought by freelancer plaintiffs within two years of a violation of this provision. If a plaintiff succeeds in proving this claim, they would receive statutory damages of $250 as well as reasonable attorneys’ fees and costs.
Under the act, the compensation provided for in the written contract must be paid either on or before the date set therein, or if not provided, no later than 30 days after the completion of the freelancer’s services under the contract. FIFA further states that, once a freelancer has commenced performance of the bargained-for services, the hiring party cannot require that the freelancer accept less compensation than the contract provides as a condition of timely payment. Freelancer plaintiffs can bring a civil action for unlawful payment practices within six years of a violation of this provision. A prevailing plaintiff could be entitled to double damages as well as reasonable attorneys’ fees and costs.
The anti-retaliation provision prohibits NYC businesses from denying a work opportunity to, discriminating against, or taking any action that penalizes a freelancer, or deters them from exercising any right secured by the act. Freelancers who allege a violation of this provision can commence a civil action within six years. If they succeed in proving their claim, freelancer plaintiffs are entitled to reasonable attorneys’ fees and costs, as well as statutory damages in the amount of the underlying contract.
There is also a procedure that allows freelancers to file complaints with the OLPS within two years of an alleged FIFA violation. The director will subsequently draft a certified letter to the employer within twenty days, explaining how the freelancer’s contract was allegedly breached. If a hiring party fails to respond to the complaint and the freelancer brings a civil action, there will be a rebuttable presumption that the hiring party committed the violations alleged in the complaint.
In addition to the private remedies imposed by the law, the city may commence a civil action where there is reasonable cause to believe that a hiring party is engaged in a pattern or practice of violations of the act. This type of action can result in the imposition of civil penalties of up to $25,000, paid into the general fund of the city.
NYC employers should familiarize themselves with the increased obligations and risks now associated with hiring independent contractors in NYC under the law. Although the director will provide model contracts as a resource for businesses, they will likely require additional language to mitigate liability and clarify undefined terms such as “completion” of services. Moreover, the act does not address the business’s recourse if the freelancer only partially performs, or if the performance is defective. Companies may also want to supplement the contract to ensure that settlement of disputes regarding performance, or a modification of a contract, is not precluded.