On October 27, 2016, the New York City Council passed the Freelance Isn’t Free Act (the Act). The Act’s stated purpose is to enhance protections for freelance workers, and to provide them “the right to written contract, the right to be paid timely and in full and the right to be free of retaliation.” The Act contains extensive damages provisions for both non-payment but also, noncompliance with the Act’s terms.
The Act serves as a powerful tool to cover “freelancers” where usual employment laws may have been unavailable. In some situations, an employer may face greater liabilities for its “freelance” workforce than it would for its regular employees due to noncompliance.
A “freelance worker” is defined in the Act as one person (or an organization consisting of one person) hired or retained as an independent contractor to provide services in exchange for compensation. § 20-927. The definition specifically excludes salespeople, medical professionals and lawyers.
Section 20-928 sets forth the requirement that a written contract is required “[w]henever a hiring party retains the services of a freelance worker and the contract between them has a value of $800 or more[.]” § 20-928.a. The $800 value may be aggregated to include the value of all contracts between the same parties for services “during the immediately preceding 120 days.” Id. This written contract must contain the following information at a minimum:
- Name and mailing address of hiring party and freelance worker
- Itemization of all services the freelance worker is to provide, the value of the services and the rate and method of compensation
- The date on which the hiring party must pay the compensation, or the manner by which that date will be determined. § 20-928.b.1-3
The hiring party must compensate the freelance worker either on or before the compensation is due pursuant to the contract, or, should the contract not specify a due date, no later than 30 days after the freelance worker’s completion of the contracted-for services. § 20-929.a.1-2. Section 20-929 also prohibits a hiring party from reducing compensation in exchange for timely compensation once the freelancer has commenced work. The Act also prohibits retaliation in any way against the freelance worker. § 20-930.
The Act sets up a few methods of enforcement.
First, is a complaint procedure. A freelance worker who believes the Act has been violated may file a complaint with the Office of Labor Standards (OLS) within a two-year period of the acts alleged to have violated the Act. After the complaint is made, and if the freelancer has not initiated a civil suit, the OLS shall send, within 20 days of receipt of the complaint, a notice of the complaint to the hiring party. The hiring party thereafter has 20 days to respond to the complaint with a position statement showing either that the worker has been paid in full, or the reasons why the worker has not been paid in full. § 20-931.d-e. 20 days thereafter, the OLS shall send the freelancer the response, as well as information informing the freelance worker that she may bring a civil lawsuit. Id.
The second — and most significant — enforcement mechanism the Act provides is the right to bring a civil action to recover unpaid fees. The Act sets a two-year statute of limitations for violation of Section 20-928’s written contract requirement, and a six-year statute of limitations for unlawful payment practices and retaliation, respectively. § 20-933.
Finally, Section 20-934 creates a cause of action for a “pattern or practice of violations,” brought by the New York City Corporation Counsel on behalf of the City. Such a suit does not prevent an individual from bringing her own cause of action. § 20-934.a.3.
The Act contains fairly robust damages provisions to remedy violations:
- A plaintiff who prevails on any violation will receive, in addition to whatever damages specified, reasonable attorneys’ fees and costs. § 20-933.b.1.
- A hiring party’s violation of the written contract requirement shall result in statutory damages of $250. Id. at b.2.a. Further, a violation of this requirement and any additional violations of the Act will also result in statutory damages equal to the value of the underlying contract in addition to other remedies as warranted. These damages are in addition to whatever damages result from violations of those other provisions. Id. at b.2.b.
- A finding of unlawful payment practices entitles the freelance worker to double damages, injunctive relief and other appropriate remedies. Id. at b.3.
- Violation of the retaliation provision will result in damages equal to the value of the underlying contract for each violation. Id. at b.4.
- In pattern or practice cases, the court may impose a penalty of up to $25,000. § 20-934.b.
Key for employers is the Act’s statement that it acts as a “supplement, and do[es] not diminish or replace, any other basis of liability or requirement established by statute or common law. § 20-935.b.” The Act also prevents the parties from waiving the Act’s provisions contractually. § 20-935.a. Foreseeably, this may permit employees asserting claims under other wage & hour laws to also assert the Act where the distinction between employee and freelancer is muddled.
The Act also provides for a “navigation program” to provide information and assistance to the freelance worker, which includes information about how to file a lawsuit, model contracts and information about employee/independent contractor classification. § 20-932.
The Act will take effect 180 days after it becomes law, and only applies to contracts entered into as of that date — it will not have a retroactive effect. The Act has been sent to the mayor of New York City for signature after a 51-0 vote-in favor.
The Act will certainly affect all work done on a project or contract basis in New York City, likely affecting a variety of industries ranging from fashion to retail to media, and could potentially extend to on-demand services in the gig economy.
While the Act on its face appears to sidestep the battles regarding employee status by specifically stating that “[n]o provision of this chapter shall be construed as providing a determination about the legal classification of any individual as an employee or independent contractor[,]” § 20-935.d, Section 20-935.b’s provision stating that the Act is a supplement to other laws begs the question of how the Act will be enforced both on its own and in conjunction with other employment laws.
Employers should be prepared to set up a written contract and payment procedure, which could help avoid the Act’s troublesome damages requirements. Companies that employ freelance workers, whether regularly or otherwise, should familiarize themselves with the Act, and think about other potential steps to prepare for its implementation. Because of the novelty of the Act — the first of its kind in the country (and indeed, whether other cities jump on the bandwagon and pass something akin to the Act could be another issue for another day) — it remains to be seen exactly how the Act will be enforced and the law developed.