New “Freelance Isn’t Free Act” Requires Written Contracts When Hiring Independent Contractors
A new New York City Law, Local Law 140 of 2016 or the “Freelance Isn’t Free Act,” imposes new requirements on New Yorkers who hire independent contractors or freelance workers to perform services. The law, which has been described as the first of its kind in the country and passed the New York City Council unanimously, took effect on May 15, 2017.
The new law applies to any independent-contractor relationship in which the worker is entitled to receive total compensation of $800 or more within any four-month period. It protects “any natural person” (i.e. an individual, even if acting through an incorporated business or under a trade name, but not firms comprising more than one worker) who is hired as an independent contractor to provide a service in exchange for money. This can include virtually any type of service that one person might be paid to perform for another, in either a business or a personal setting, other than in an employer/employee relationship. However, the law does not cover licensed medical professionals, attorneys, certain salespersons, and persons providing services for federal, state, or local government agencies. The sponsor of the law has asserted that it would apply whenever the person providing the services is located in New York City, even where the hiring party is located elsewhere (such as where services are arranged over the Internet).
The law requires that the person or entity hiring the independent contractor must prepare and provide a written contract setting forth the terms of the relationship. The contract must set forth information including the name and mailing address of both parties, a description of the services to be provided, the value of the services, the rate and method of compensation, and the date by which the compensation is to be paid (or the method by which the payment date will be determined). A committee report accompanying the legislation indicates that the “written” contract can be in the form of an e-mail or text message, as long as all the required information is included. A model form of contract can be found on the Department of Consumer Affairs’ website at https://www1.nyc.gov/site/dca/workers/workersrights/freelancer-workers.page
The hiring party must pay the worker the agreed-upon compensation by the date specified in their contract. If no specific payment date is specified, payment must be made within 30 days after the services are completed. The law makes it unlawful to pay the worker less than the agreed-upon compensation, or to retaliate or discriminate against a worker for exercising his or her rights under the law. The law provides a detailed procedure for workers under which they may file a complaint with the Office of Labor Policy and Standards of the Department of Consumer Affairs or in court in the event the law is violated.
The penalties for violations can be significant. For example, if the hiring party fails to pay money a worker has earned by the due date, a judge may order the hiring party to pay the worker double the amount owed plus any other damages incurred and the worker’s attorneys’ fees. If a hiring party violates the law on multiple occasions, the City of New York may bring a proceeding and the hiring party may be subject to additional penalties up to $25,000. However, if a hiring party’s only violation of the law was failure to provide a written contract, then a claim may be filed only if the worker requested a written contract from the hiring party before the work began, and in that event the penalty is limited to $250.
It is important to emphasize that the new law applies not only to businesses that hire independent contractors, but also to individuals who may hire someone to provide child care, clean their apartment, walk a pet, or provide any other form of service. Hiring parties with questions about the new law may contact Ira B. Matetsky of Ganfer & Shore, LLP or their contact at the firm.