Freelancers
On May 15, 2017, New York City’s Freelance Isn’t Free Act (the “Act”) took effect, offering new protections to freelancers. The Act gives most freelancers the right to obtain a written agreement for their work and receive timely payment. The regulation also prohibits certain types of retaliation against freelancers for seeking a written contract or payment. Violations of this law can result in significant liability. As a result, if you are a freelancer or a business that hires them, it is important to understand when the Act applies and what rights and obligations apply.
When Does the Act Apply?
The Act provides potentially powerful remedies but also limits the individuals it covers.
Freelancer Definition
A freelancer is any individual retained as an independent contractor, with the exception of certain sales representatives, lawyers, and doctors. Additional exemptions include freelancers hired as employees, working for no pay, or hired by the government. The freelancer may have an LLC, S-Corp or C-Corp, or use a trade name, but it may not have other employees. Freelancers can exist in any industry and may be referred to by other names, such as consultant, gig worker, contractor or subcontractor, or contract worker.
It is important to note that while the parties may refer to a worker as a freelancer, that designation is not definitive under labor and employment laws. The hiring party must take care that a worker is properly categorized as an independent contractor because employee misclassification can result in substantial damages and penalties.
Work Covered
The work agreed to must total $800 in any 120-day period to fall under the Act. In addition, the worker must perform the work in New York City, although the Act may also apply to work performed outside the city, depending on the circumstances. The court will look at whether the worker performed the work in the New York City, a business actually hired the worker, and the business had significant operations.
What Rights Exist Under the Freelance Isn’t Free Act?
The Act provides certain protections for freelance workers including:
- Written contract. Contracts that total at least $800 in any 120-day period must be in writing and clearly state the agreed upon work, the rate and method of compensation, and the payment date or the mechanism by which the payment date will be determined.
- Timely and full payment. Businesses must pay freelancers for all completed work on or before the date that is in the contract or, if there is no specified payment date, within 30 days of completion.
- Right to file a complaint. Ondividuals can file a complaint with the Office of Labor Policy & Standards (“OLPS”). OLPS will notify the hiring party about the complaint and the hiring party must respond to the complaint within 20 days. Individuals can also bring an action in state court.
- Protection from retaliation. A hiring party may not retaliate against a freelancer who exercises his or her rights under the law. This includes threats, intimidation, harassment, blacklisting, or other actions.
Freelancers cannot waive their rights under the Act. Hiring parties who fail to comply with the law may be subject to penalties, including statutory damages, double damages, injunctive relief, and attorneys’ fees. Where there is evidence of a pattern or practice of violations, the New York City Corporation Counsel can also seek a civil penalty of not more than $25,000 against the hiring party.
How Are Rights Enforced Under the Freelance Isn’t Free Act?
If a freelancer believes a hiring party has violated the law, he or she can file a complaint with the OLPS or go directly to court. Where the worker chooses to go to the OLPS, the Office will notify the hiring party of the complaint. The hiring party has 20 days to respond in writing. If the hiring party does not respond, the freelancer can sue in court and the court will presume the hiring party violated the law because of the lack of a response. As a result, the hiring party would have the burden of proving it did not violate the Act. Freelancers who choose to go to court first cannot thereafter file a complaint with the OLPS. For those who go to court, the OLPS has a navigation program where it provides information to freelancers to help them understand how to enforce their rights, but it does not give legal advice or represent parties in litigation.
Retaliation
The Act expressly prohibits retaliation against freelancers seeking contracts or payment. A hiring party may not use threats, intimidation, discipline, harassment, blacklisting, or take other actions reasonably likely to penalize or deter freelancers from exercising their rights. Freelancers can file a complaint with the OLPS or sue in court and recover damages.
Non-Payment and Late Payment
Hiring agents must pay freelancers in accordance with the date that is in the contract or within 30 days of completion if the contract does not specify payment. Freelancers who do not receive payment can file a complaint with OLPS or go to court, as explained above. Freelancers can obtain double damages, attorneys’ fees, and other remedies.
How Can Hiring Parties Ensure Compliance with the Act?
To avoid liability under the Act, business owners should be proactive. Best practices include the following:
· Update standard freelancer contracts to comply with the Act and review revised contracts carefully to ensure they do not violate the Act
· Develop and mandate internal payment procedures to ensure timely payment
· Notify and train those responsible for hiring freelancers on the rules
Freelancers cannot waive their rights under the Act. Hiring parties who fail to comply with the law may be subject to penalties, including statutory damages, double damages, injunctive relief, and attorneys’ fees. Where there is evidence of a pattern or practice of violations, the New York City Corporation Counsel can also seek a civil penalty of not more than $25,000 against the hiring party.
Cost of non-compliance
Hiring parties may be liable for damages, attorneys’ fees, and various penalties, including:
- Failure to enter into a written contract: $250 if no other violation of the Act or the value of the contract if there is another violation
- Non-payment or late payment: double damages, injunctive relief, and other appropriate remedies
- Retaliation: damages equal to the value of the contract for each retaliation violation
In addition, courts may award freelancers reasonable attorneys’ fees and costs.
Where a hiring party violates the law on multiple occasions, New York City may also sue and obtain penalties of up to $25,000 and other remedies.
Conclusion
As the gig economy continues to grow, it is imperative that freelancers and businesses are aware of their rights and responsibilities. Speak to an attorney regarding freelance agreements.
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