New York State expands upon the footprint set by New York City’s Freelance Isn’t Free Act enacted in 2017, broadening protections for freelance workers throughout the state. The law seeks to establish basic protections against some of the most “pernicious workplace practices . . . for a “key population in the modern workforce that is currently unprotected by state Labor Law.” The Act looks to achieve this by requiring written contracts between freelancers and the companies that hire them, requiring timely payment for services rendered, and prohibiting the reduction of agreed compensation after work begins, among other things.
New York State’s Freelance Isn’t Free Act (“FIFA” or the “Act”) was originally scheduled to go into effect on May 20, 2024, which is 180 days after enactment. However, the state has delayed its effective date until August 28, 2024. FIFA applies prospectively to all new contracts executed after this date.
Key Definitions
A “freelance worker” is defined under the Act as any natural person or organization composed of no more than one natural person, whether or not incorporated or employing a trade name, that is hired or retained as an independent contractor by a hiring party to provide services in exchange for an amount equal to or greater than $800.00 (either by itself or in the aggregate when all contracts for services between the parties during the previous 120 days are considered). Certain professions are excluded under the Act including sales representatives as defined under NY labor law, attorneys, licensed medical professionals, and construction contractors defined under FIFA.
A “hiring party” is defined under the Act as any person who retains a freelance worker to provide any service, with the exception of the US government, the State of New York, a municipality or any foreign government.
Importantly, the Act explicitly states that is not to be construed as providing a determination about the legal classification of a worker as an employee or independent contractor.
Contract Requirements
For all freelancer engagements where the value of services meets or exceeds $800.00 either in one single contract, or in the aggregate as described above, a written contract is required. The hiring party must provide a copy of the contract to the freelance worker and the contract must be retained for a period of no less than 6 years. Failure to retain a contract for the statutory period shall give rise to a presumption that the terms that the Freelance worker has presented are the agreed upon terms.
The contract must contain the following terms at a minimum:
- The name and mailing address of both the hiring party and the freelance worker;
- An itemization of all services to be provided by the freelance worker, the value of the services to be provided pursuant to the contract, and the rate and method of compensation;
- The date on which the hiring party must pay the contracted compensation or the mechanism by which such date will be determined; and
- The date by which a freelance worker must submit a list of services rendered under such contract to the hiring party in order to meet any internal processing deadlines of such hiring party for the purposes of compensation being timely rendered by the agreed-upon date as stipulated in subparagraph (iii) [above].”
If a contract fails to specify either the timing or mechanism for determining when compensation must be paid by the hiring party, the Act provides that payment must be made no later than 30 days after completion of the freelance worker’s services under the contract.
The Act provides for the inclusion of additional terms by the Department of Labor Commissioner, as well as the creation of model contracts for public use which shall be available on the Department of Labor website. A model contract is not currently available, but employers may want to review the model contract provided by New York City in conjunction with the enactment of the NYC FIFA, to see what may be on the horizon.
Anti-Discrimination and Anti-Retaliation
The Act also includes anti-discrimination and anti-retaliation provisions which prohibit a hiring party from threatening, intimidating, disciplining, harassing, denying a work opportunity to, or discriminating against a freelance worker, or take any other action that penalizes a freelance worker for, or is reasonably likely to deter a freelance worker from, exercising or attempting to exercise any right guaranteed under the law, or from obtaining any future work opportunity because the freelance worker has done so.
Violation of the Act
The Act provides for both a private right of action as well as enforcement by the attorney general if reasonable cause exists to believe that a hiring party is engaged in a pattern or practice of violations of the law. Freelance workers who prevail on claims alleging violations of the Act may receive statutory damages equal to the value of the contract, an award of double damages, injunctive relief, and other remedies as may be appropriate depending on the violation.
FIFA also permits the attorney general to assess civil penalties on behalf of impacted freelance workers.
Lastly, the Act vests the labor commissioner with authority to receive and investigate complaints of violations of the law filed by freelancers or their authorized representatives and the discretion to take remedial action as appropriate ranging from equitably adjusting controversies between parties, taking assignments of claims for wages from freelance workers or third parties in trust, filing suit to collect wages, among others.
Next Steps for New York State Employers
Given the huge proliferation of the freelance market post-COVID, a majority of businesses will have experienced working with freelance workers in some respect, reinforcing the expansive application of the Act for New York businesses. Research conducted by Emergent Research for MBO Partners and published in Forbes in October 2023, shows that “the number of fulltime freelancers in the US grew by 90% between 2020 and 2023, and part-time freelancing grew by over 130% … over 80% of large corporates plan to increase their utilization of freelancing.”
Accordingly, New York businesses who count themselves among these users should review their current and anticipated use of freelance workers and consult with legal counsel to ensure compliance with the Act prior to the August deadline.