We’re not even out of 2023, and New York employers who engage independent contractors already have new obligations to reckon with before next spring. On November 22, 2023, New York Governor Kathy Hochul signed the New York State “Freelance Isn’t Free Act”, increasing obligations for parties who engage freelance workers (including independent contractors). Starting May 20, 2024, hiring parties (including employers who engage independent contractors) must provide freelance workers with written contracts, pay them within a specified time period, maintain records, and satisfy additional new obligations—and freelance workers will gain a private right of action for violations.
The Act replicates the 2017 NYC’s Freelance Isn’t Free Law, adding administrative oversight and support from the New York State Department of Labor and the New York State Attorney General while maintaining New York City’s local law. The Act will apply to contracts entered into on or after the May 20, 2024 effective date.
Here are some key details:
Definitions: “freelance workers” and “hiring parties”
The Act defines a “freelance worker” 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 eight hundred dollars”—but does not include certain sales representatives, practicing attorneys, licensed medical professionals, and construction contractors. Also, a “hiring party” is any person (other than government entities) who retains a freelance worker to provide any service.
Written contracts required
The Act requires a written contract if the freelance work is worth at least $800, inclusive of multiple projects over a 120-day period. The hiring party must furnish a copy of the contract, either physically or electronically. At a minimum, the written contract must include:
- The name and the 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 under 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 the date will be determined); and
- The date by which a freelance worker must submit to the hiring party a list of services rendered under the contract to meet the hiring party’s internal processing deadlines to allow compensation to be paid by the agreed-upon date.
The New York State Department of Labor will provide model contracts on its website for freelancers and hiring parties to use.
Thirty days to pay (unless parties agree to an alternative time frame)
The law sets a 30-day deadline (after completion of services) for payment in full unless another time frame is agreed to by the parties. In addition, once the freelance worker has commenced performance of the services, the hiring party cannot require as a condition of timely payment that the freelance worker accept less compensation than the amount contracted for.
Hiring parties must keep records—and face an adverse presumption if they don’t
Hiring parties are required to keep contracts for at least six years, and must make the contracts available to the New York State Department of Labor Commissioner upon request. If a hiring party fails to produce a contract upon the Commissioner’s request, that failure gives rise to a presumption that the contract terms the freelance worker has presented are the agreed upon terms.
Under the Act, engaging entities cannot not “threaten, intimidate, discipline, harass, deny a work opportunity to, or discriminate 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.”
Private right of action and remedies
The Act provides a private right of action, specifying that any freelance worker alleging a violation of the Act can file an action in any court of competent jurisdiction for damages. In addition, freelance workers (or their authorized representative) may file a complaint with the NYSDOL. A plaintiff who prevails on a claim of non-payment may recover—in addition to the amounts owed under the contract with the hiring party—double damages, injunctive relief, reasonable attorneys’ fees, costs, and “such other remedies as may be appropriate.” A plaintiff who prevails on a claim of retaliation may recover—in addition to any other amounts owed under the law—“statutory damages equal to the value of the underlying contract for each violation [of the anti-retaliation provision].” In addition, where reasonable cause exists to believe that a hiring party is engaged in a pattern or practice of violations of this article, the New York Attorney General may commence a civil action on behalf of the state and seek injunctive relief, civil penalties of not more than $25,000, and “any other appropriate relief.” Actions for non-payment of the contracted compensation or for retaliation are subject to a six-year statute of limitations.
While most companies engaging freelancers and independent contractors already utilize written agreements, it is important to ensure the agreements include all the terms specified above. To the extent you need support auditing contracting relationships and agreements, contact your Baker McKenzie employment lawyer. Misclassification is certainly a hot topic for the plaintiffs’ bar and we regularly advise on best practices in this area.