On October 27, 2016, the New York City Council passed a bill, known as the “Freelance Isn’t Free Act” (the “Act”). The Act requires New York City hiring parties employing freelance workers to enter into a written contract containing certain specified terms, and further requires freelancers to be paid within 30 days of completion of the freelancer’s services, if the contract does not specify a due date. The Act also contains an anti-retaliation provision and imposes stiff penalties for violations, including double damages and legal fees. Businesses that repeatedly violate the Act can also be fined up to $25,000. The Act is currently pending before Mayor Bill de Blasio, whose office has signaled its support of the Act. Once signed, the Act will take effect 180 days after it becomes a law and will apply only to contracts entered into on or after the effective date of the law.
Freelance Workers Protections
The term “freelance worker” is defined under the Act as any natural person or organization composed of no more than one individual (whether or not incorporated or under a trade name) who is hired or retained as an independent contractor by a hiring party to provide services for compensation. The term specifically excludes sales representatives (as defined under New York Labor law§191-a), attorneys, and licensed medical professionals.
The Act requires a written contract for any freelance work valued at $800 or more, either by itself or when aggregated with all work performed for the same hiring party over a 120-day period. The written contract must include, at a minimum:
- the names and mailing addresses of both parties;
- an itemization of all services, the value of such services and rate or method of compensation;
- the date on which the freelance party must be paid or the mechanism by which such date will be determined; and
- additional terms that the New York City Office of Labor Standards (“OLS”) may prescribe by regulation.
Further, all compensation must be paid either: (1) on or before the due date stated in the contract; or (2) if the contract does not specify the due date or the method of determining the due date, within 30 days after the completion of the contracted work. Once a freelance worker begins performing under the contract, the hiring party is prohibited from forcing the worker to take less than the contracted compensation in exchange for timely payment. The Act also prohibits threats, retaliation, harassment, and discrimination against freelance workers who exercise or attempt to exercise their rights under the Act. Any provision of the contract seeking to waive rights under the Act will be void as a matter of public policy (although failure to comply with provisions of the Act does not render any contract between a freelance worker and a hiring party void or voidable, or otherwise impair any obligation or right related to the contract).
Legal Recourse and Damages
The Act permits an aggrieved freelance worker to start a civil action or to file a complaint with the OLS and receive substantial damages based on the nature of the violations. A freelance worker has 2 years to file a complaint about any violation of the Act with the OLS, or to start a civil action in court asserting claims of written contract violations, and 6 years to file a civil action asserting claims for untimely payment and retaliation.
A failure to provide a written contract is punishable by statutory damages of $250, provided a plaintiff can show that he or she requested such a contract from a hiring party before the work began. A failure to provide a written contract coupled with another violation of the Act (i.e. failure to make timely payment or unlawful retaliation) is punishable by statutory damages equal to the value of the contact plus: (1) double damages and injunctive relief for violation of the timely payment provision; and/or (2) statutory damages equal to the value of the contract for unlawful retaliation. Moreover, a prevailing plaintiff is entitled to recover reasonable attorney’s fees and costs, irrespective of the type of violation.
Additionally, New York City’s Corporation Counsel can bring a cause of action against a hiring party for pattern or practice of violations of the Act, which could result in injunctive relief and civil penalties of up to $25,000.
While the Act has not yet been signed into law by Mayor Bill de Blasio, employers are well advised to monitor the forthcoming developments and guidance on the Act.
On November 16, 2016, Mayor Bill de Blasio signed the “Freelance Isn’t Free” act into law. The law goes into effect on May 15, 2017, and will apply only to contracts entered into on or after the effective date.