New York City’s “Freelance Isn’t Free Act” Took Effect on May 15 – What Do Employers Do Next?

On November 16, 2016, 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. 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 timely and full payment of wages. This is a reminder that employers should undertake a 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 out of 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 Family and Medical Leave Act. Further, independent contractors are not subject to protection under Title VII or its state and local equivalents, nor are they entitled to overtime compensation under the 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 employers should be aware of, including the following:

1. When a party hires a freelance worker 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).
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, or discriminate against freelance workers, or take any other action that penalizes, 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 director of the Office of Labor 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) to six (for violations of sections 20-929 or 20-930) years after the acts alleged to have violated the Act took place.
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 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.” Such an action does not prevent an individual alleging a violation under the Act from also bringing a civil action.

What This Means for Employers

As noted, the Act became effective on May 15, 2017. Employers should review and revise their current independent contractor agreement templates to ensure they meet the Act’s requirements. As the penalties for violation of the Act are quite severe, it is imperative that employers have a compliant agreement on hand, and be fully prepared to make all payments called for under the agreement.