Topic: Business, Contracts
Time Investment: 7 Minutes
Suggested Product: Independent Contractor Bundle
New York City recently made steps to ensure that the City That Never Sleeps won’t also be known as the City That Cheats Freelancers Out of Their Hard-Earned Money when it passed the Freelance Isn’t Free Act in May 2017. This first-of-its-kind Act makes some big changes in how freelancers are supposed to work, so here’s the scoop on what you should know to make sure your business keeps with the times.
Wait, I Don’t Even Live in New York City! Why Should I Care?
Even if you are not a resident of New York City, this Act can still affect you and your business!
Businesses that contract with freelancers who live/work in New York City (or vice versa) can still be directly affected. If you are unsure whether the Act applies to working relationships you currently have or whether your current agreements meet the Act’s requirements, it’s a good idea to seek legal advice from a licensed attorney in your jurisdiction.
But this could affect you, even if you don’t live or do business with those who live/work in the city!
Shortchanging freelancers is a big problem nationwide. How big of a problem? One recent study from the Freelancers Union shows that about half of freelancers surveyed had issues getting paid by at least one client. According to Forbes, there are over 50 million American freelancers, so it makes sense that other jurisdictions are taking notice of the Act. Some of those jurisdictions have even started to take action.
A version of the Act could definitely be making an appearance in your jurisdiction or one near you. Make sure to be on notice for similar laws coming into effect in your area – efforts are already being made to get more legislation like the Act on the books.
What is the Freelance Isn’t Free Act?
The Freelance Isn’t Free Act is a newly enacted law in New York City that creates new rights, remedies, and resources for freelancers. It makes sure that freelancers are paid in full and on time. It also protects freelancers from retaliation if they choose to assert their rights.
Basically, the Act covers situations where a person or business retains an individual or one-person operation to perform a service. It requires freelancers to actually be paid within a reasonable amount of time, according to the original payment terms.
This sounds easy enough, but there is a history of problems concerning freelancers and their payments. The Act aims to try to prevent these problems by creating protections for freelancers in the form of contractual requirements to cover their working relationships.
So, What Exactly Is Required?
The Act requires that:
- Contracts worth $800 or more be in writing;
- Contracts between the same freelancer and hiring party that cumulativey cost $800 or more over a 120-day period be in writing;
- The contracted rate of payment cannot be reduced after the freelancer begins work (even if the lower rate enables the hiring party to pay the freelancer on time);
- Freelancers be paid on or before the contractual payment due date. If there is no specific due date or method to determine the payment date in the contract, the hiring party must pay the freelancer no more than 30 days after services are completed.
There are also specific terms the written contracts must include:
- Name and mailing address of the freelancer and the hiring party;
- A list of the services to be provided;
- Value of the services provided;
- Rate of compensation;
- Method of compensation; and
- Either the date when the hiring party must pay the freelancer OR the method that will be used to determine the payment date.
But that doesn’t have to be all – these are the minimum requirements. Other terms and provisions can be added where both parties agree. You should be on the lookout for any terms that attempt to waive a freelancer’s rights under the Act, though – these are invalid, along with any terms that attempt to limit the freelancer’s right to communicate about the contract or file a complaint.
Finally, don’t forget to hold onto your horses – the Act also requires that the freelancer and the hiring party keep a copy of the contract.
Who Does This Affect?
The Act defines a “Freelancer” as any individual hired or retained as an independent contractor by a hiring party to provide services for compensation.
Some key facts to remember are that:
- Individuals may qualify as freelancers, even if they are incorporated or use a trade name;
- Freelancers are covered by the Act, regardless of immigration status;
- Freelance work is not limited to one specific industry; and
- Freelance workers do not necessarily require a license, but some freelancers may need a one to work in their profession or to perform certain tasks.
There are some types of workers that are not covered by the Act, such as:
- Freelancers hired as employees;
- Sales representatives (as defined by Section 191-a of the New York Labor Law);
- Attorneys; and
- Licensed medical professionals
The Act defines a “Hiring Party” as any person, organization, or entity other than a local, state, federal, or foreign government that retains a freelance worker to provide any service for compensation. This definition does not apply to governmental entities, whether domestic or foreign.
When Does The Act Go Into Effect?
The Freelance Isn’t Free Act became effective on May 15, 2017 in New York City. It covers all contracts and agreements made on or after that date.
What Do I Do If Someone Violates the Act?
Under the Act, freelancers may pursue claims against hiring parties that fail to use a contract or live up to their obligations. This can be done either through the Department of Consumer Affairs in New York City (DCA) or by holding the hiring party civilly liable through private legal action.
Freelancers can file complaints regarding violations of the Freelance Isn’t Free Act with the Office of Labor Policy & Standards (OLPS), which is part of the DCA. OLPS can help in a variety of ways: by taking your complaint, providing court navigation services to freelancers who want to pursue claims in court, and provide information to freelance workers and hiring parties about their rights and responsibilities.
Be careful: not having a written contract doesn’t get you off the hook. The Act can still apply without a written contract and when a contract was made but does not include all required terms.
Worried that your hiring party might get salty if you pursue a claim against them? Fear not – hiring parties cannot retaliate against freelancers who chose to exercise their rights under the Act. Retaliation includes intimidation, harassment, blacklisting, or threats; basically, it’s behavior that would penalize or deter a freelancer from exercising or trying to exercise their rights.
How Does This Affect Me?
How this affects your business really depends on how you’re already doing business. Some businesses already might be in compliance just because of how they already run things, but other businesses might have to do a little more.
There are some very important best practices that you can adopt now (if you aren’t already doing them!) to make sure you are complying with the law and treating your freelancers fairly:
- Pay your freelancers on time, when you told them you would, in the exact amount you agreed to. This sounds simple, but following through on your obligations is crucial!
- Use a contract every time you do business. It’s important to make sure that both parties are being protected and it’s a great habit to get into.
Still Need More Information?
If you need more assistance or information, feel free to check out these sources:
- Freelance Workers (NYC Consumer Affairs Workers Rights)
- Local Law 140 of 2016 (Freelance Isn’t Free Act)
- Freelancers Union (represents the 56.7 million independent workers across the United States)
- The Freelance Isn't Free Law Explained
If you are an independent contractor or if you are looking to hire an independent contractor, check out this TheLawTog® Resource that can be amended to suit you and your business’ specific needs: