The Establishing Protections for Freelance Workers Act, also known as the Freelance Isn’t Free Act, (the “Freelance Law”), which was touted by New York City Mayor Bill de Blasio as the first law in the nation aimed at protecting wage payment rights of freelance workers, became effective last Monday, May 15, 2017. The Freelance Law imposes specific requirements on companies located in New York City that contract with freelance workers, including requiring a written freelance contract, requiring companies to pay freelancers timely and in full, prohibiting retaliation against freelancers who exercise their rights under the Freelance Law, and creating penalties against companies who fail to comply with these requirements.
Who is a freelance worker?
The Freelance Law defines a freelance worker as a single person or an organization, composed of only one person, that is hired as an independent contractor to provide services in exchange for compensation. The definition specifically excludes sales representatives as defined in section 191 of the New York Labor Law, licensed medical professionals, and individuals practicing law.
What are the specific requirements of the Freelance Law?
If a company located in New York City contracts with a freelance worker on or after May 15, 2017, the company must:
- Provide a written contract if the work to be performed is worth $800 or more – this $800 includes multiple small projects performed within the same 120-day period;
- Ensure that all payments to the freelancer are made on a timely basis and paid in full; and
- Prohibit any type of retaliatory or adverse action against freelance workers for exercising the rights granted to them under the Freelance Law.
What must be included in a written freelance contract?
For work that is worth $800 or more, the written freelance contract must include:
- The name and mailing address of both the hiring party and the freelance worker;
- An itemized list of the freelancer’s services, including the value of the service and the method of payment; and
- The date of the worker’s payment.
When should a freelancer be compensated?
As stated above, for work worth $800 or more, the written contract should state when and how the freelancer is to be paid. However, if the contract is silent as to time of payment the company has up to 30 days after the completion of services rendered to furnish payment.
What happens if the Freelance Law is violated?
For statutory violations, a freelancer may file an administrative complaint with the City. The statutory damages awarded vary. A freelancer may recover $250 for a company’s failure to provide a written contract for work worth $800 or more. For failures to timely or fully pay and for retaliation against a freelancer, or for violations of more than one of the three provisions, a freelancer may recover damages up to the value of the contract. Freelancers may also receive double damages and injunctive relief for successful failure to pay claims. In addition, New York City may bring a civil action and recover up to $25,000 against any company found to have a pattern or practice of repeatedly violating the provisions of this law.
There is a six-year statute of limitations for claims alleging failure to make a timely or full payment or retaliation. There is a two-year statute of limitations for claims alleging violation of the written contract requirement.
How should NYC companies proceed under this new law?
Companies located in New York City that contract with independent contractors are encouraged to determine whether any of their independent contractors fall within the law’s definition of a freelance worker. If so, they should take a look at their contracting and payment practices to ensure compliance with the requirements outlined above and limit potential liability. Keep in mind, however, that the Freelance Law does not change the criteria for determining whether an individual is properly classified as an independent contractor, as opposed to an employee. Therefore, adherence to the contracting and payment requirements of the Freelance Law alone will not shield companies from potential liability related to misclassification if the individuals at issue are not properly classified as independent contractors.
*Danielle Thompson is a law clerk in Sheppard Mullin’s New York office.