Action Item: The Establishing Protections for Freelance Workers Act (the “Freelance Isn’t Free Act”) became effective on May 15, 2017. The Freelance Isn’t Free Act imposes specific requirements on companies located in New York City that contract with freelance workers (defined below) and enhances protections for these workers, including the right to a written contract, timely and full payment, and protection from retaliation.

The Freelance Isn’t Free Act, contained in Local Law 140 of 2016, is the first law of its kind in the United States. It requires written contracts for all engagements of $800 or more between a freelance worker and a company. The contract must contain the following information: (i) the name and mailing address of both the hiring party and the freelance worker; (ii) an itemized list of all services to be provided by the freelance worker; (iii) the value of the services to be provided; (iv) the method of payment; and (v) the date the freelance worker is to be paid. If the contract does not specify a date for payment, a freelance worker is entitled to payment within 30 days of the completion of the work.

A worker has several alternatives to seek enforcement of rights under the Freelance Isn’t Free Act. Freelance workers can file a civil action in court or an administrative complaint with the Office of Labor Standards. Additionally, the New York City Corporation Counsel can file civil actions against companies that are alleged to have engaged in a “pattern or practice of violations.” To assist freelance workers, the Freelance Isn’t Free Act provides for a “navigation program” designed to provide information and assistance, including information about how to file a lawsuit, sample contracts, and information about employee/independent contractor classification/misclassification.

What NYC Companies Need to Know:

1. Is my company affected by the Freelance Isn’t Free Act? The Freelance Isn’t Free Act covers all freelance workers whose contracts with a company in any 120-day period meet or exceed $800 in value.
2. Who is a freelance worker? A freelance worker is any individual or organization composed of no more than one individual “hired or retained as an independent contractor to provide services in exchange for compensation.” This definition excludes sales representatives, licensed medical professionals, and individuals engaged in the practice of law.
3. What penalties may be imposed for violations? In addition to permitting claims for unpaid compensation, the Freelance Isn’t Free Act provides for the imposition of penalties under certain circumstances:

• Hiring parties that fail to provide a written contract upon the freelance worker’s request are subject to statutory damages of $250.
• Retaliation against a freelance worker for exercising his/her rights under the Freelance Isn’t Free Act will subject a hiring party to statutory damages equal to the value of the contract.
• Companies that are found to have engaged in repeated violations of the Freelance Isn’t Free Act may be fined up to $25,000.
• Aggrieved freelance workers can also recover unpaid freelance fees, attorneys’ fees and costs, double damages for unlawful practices, injunctive relief, and “other appropriate relief” depending on the circumstances.

Companies located in New York City that contract with independent contractors are encouraged to be mindful that such individuals likely fall within the Freelance Isn’t Free Act’s definition of a “freelance worker.” If an individual or single-individual organization meets this definition, companies should ensure their contracting and payment practices comply with the Freelance Isn’t Free Act’s requirements.

Businesses should also take this opportunity to reevaluate any individuals currently classified as independent contractors to minimize risk of misclassification. 

The Freelance Isn’t Free Act specifically states that it is not designed to substitute its remedies for those available under other laws—such as wage and hour protections, eligibility for unemployment compensation, and obligations relating to withholding of state and local payroll taxes. Accordingly, companies should anticipate that attorneys filing claims on behalf of individuals seeking relief for violation of the Freelance Isn’t Free Act will also assert claims under local, state, and federal laws alleging that the company has misclassified its workers.