United States: NYC Passes Comprehensive Independent Contractor Bill

On October 27, the New York City Council, long known for pushing the envelope when it comes to employment legislation, passed a first-of-its-kind bill, known as the "Freelance Isn't Free" Act, that requires written agreements between certain independent contractors and the entities that engage them (the Act). The Act also bars wage theft and retaliation against contractors, and imposes substantial penalties on businesses that fail to comply with these and other requirements surrounding the independent contractor relationship. In short, the Act represents a major sea change with the use of independent contractors.

Written Agreement Required

Perhaps most notably, the Act requires that virtually all entities that engage a "freelance worker" for $800 or more in services execute a written agreement with the contractor before the work begins. "Freelance worker" means "any natural person or any 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 compensation."

The written agreement must include, 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 contractor
  • The value of the services
  • The rate and method of the contractor's compensation
  • The date on which the contractor must be paid or the mechanism by which such date will be determined
  • Any other terms that the newly created Office of Labor Standards (OLS) designates by rule

The Act directs OLS to make available model contracts, in English and six other languages, on its website for use by the general public. OLS will also be in charge of educating the public – both freelancers and the business community – about the new law, through what the Act calls a "navigation program." Under the navigation program, OLS will, among other things, provide freelancers with general information about classification as an employee or independent contractor.

Unlawful Payment Practices and Retaliation

In addition to requiring a written independent contractor agreement under most circumstances, the Act:

  • Requires that all compensation earned by an independent contractor be paid on or before the date such payment is due as specified in the parties' agreement or, if the agreement does not specify, within 30 days following completion of the contractor's services
  • Requires that once a freelance worker has begun performing under the contract, the hiring party cannot require as a condition of timely payment that the contractor accept less than the contractually specified compensation
  • Bars retaliation – including threats, intimation, discipline, harassment, denying a work opportunity, and discrimination – against contractors who exercise or attempt to exercise their rights under the Act (e.g., opposing a practice prohibited by the Act or filing a complaint or commencing an action alleging a violation of the Act). The Committee Report accompanying the Act also notes that "[e]xamples of retaliation include blacklisting a freelance worker from an industry, discrediting a freelance worker to other potential hiring parties or canceling a multipart contract after the contracted work has begun. Subject to surrounding circumstances, a claim of retaliation might also exist if, having established the terms of a contract for freelance services, the hiring party cancels the agreement in response to a request by the freelance worker to memorialize the agreement in a written contract."

These provisions appear to apply even if the value of the services rendered is less than $800.

Legal Recourse and Available Damages

The Act provides allegedly aggrieved contractors with several avenues of recourse. First, the Act prescribes an extremely nuanced procedure for contractors to file complaints with OLS. Second, separate and apart from the administrative route, contractors may also commence civil actions in court against allegedly non-compliant businesses.

Regardless of the forum in which a contractor pursues his/her claims, violations of the Act can have steep consequences, including:

Failing to Provide a Written Agreement

  • If the only violation committed is the hiring party's failure to provide a written agreement as required by the Act, statutory damages of $250 (and only then if the contractor can show that (s)he requested a written contact from the hiring party before work began)
  • If, however, the hiring party failed to provide a written agreement and also violated another provision of the Act – by either failing to make timely and proper payment or retaliating against the contractor – statutory damages equal to the value of the contract plus any damages for the additional violation(s), as set forth below

Unlawful Payment Practices

  • Double damages and injunctive relief

Retaliation

  • Statutory damages equal to the value of the contract

Notably, irrespective of the type of violation committed, a successful plaintiff can also recover reasonable attorneys' fees and costs. For contractors seeking to avail themselves of these remedies, a two-year statute of limitations applies to claims that the hiring party failed to provide a written agreement, while a six-year limitations period applies to all other claims (i.e., unlawful payment practices and retaliation).

Lastly, the Act permits the city's corporation counsel to commence a civil action where reasonable cause exists to believe that a hiring party has engaged in a pattern or practice of violating of the Act. If the court determines that the hiring party has engaged in a pattern or practice of violations, a civil penalty of up to $25,000 may be levied.

Other Provisions

In addition to the above, the Act specifies that:

  • Any agreement purporting to waive a contractor's rights under the Act will automatically be deemed void as a matter of public policy. The precise scope of this provision – and whether it would bar contractors from entering into settlement agreements resolving their claims under the Act – remains to be seen, and will likely need to be resolved by the courts.
  • Failure to comply with the Act will not render any contract between a hiring party and a freelance worker void or voidable, or otherwise impair any obligation, claim, or right related to such contract.
  • The Act is not to be construed as providing a determination about the legal classification of any individual as an employee or independent contractor.
  • The $800 requirement for a written agreement is satisfied when the contract for freelance services has a value of $800 or more either by itself or when aggregated with contracts made between the same parties in the immediately preceding 120 days.
  • Technically, the requirement for a written contract can be satisfied by any writing or writings that meet New York state law requirements for a contract and contain the required terms. For example, an email, a letter, an advertisement or a text message, or some combination of those, that satisfy the state law requirements for a contract and contain the information required by Act, would satisfy the requirement to reduce the contract to a writing.

Undoubtedly, OLS will issue guidance in the coming months expanding upon these and other aspects of the Act.

When Will the Act Take Effect?

After receiving unanimous support from the NYC Council, the Act now moves to Mayor Bill de Blasio's desk to be signed. Although the mayor himself has not explicitly said whether he will sign the bill, his office has signaled that it supports the measure. Once signed, the Act will take effect 180 days later – meaning likely sometime late next spring – and will only apply to contracts entered into on or after the effective date. In the meantime, all NYC businesses that use independent contractors should review and update their independent contractor agreements as appropriate, or speak with counsel about preparing such an agreement, and align their payment practices with the Act.

This article is presented for informational purposes only and is not intended to constitute legal advice.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions