United States: Freelance Isn't Free Act: Companies Beware When Dealing With Freelance Workers

Last Updated: December 15 2016
Article by Jonathan A. Trafimow and James P. Chou

On November 16, 2016, Mayor Bill DeBlasio signed into law a bill to safeguard freelance workers against wage theft by hiring parties. The new law creates significant liability for companies that fail to provide formal written contracts to freelance workers for all but the smallest of engagements, and for failing to make full and timely payments under those contacts.

Commonly known as the Freelance Isn't Free Act (the "Act"), the new law establishes and enhances protections for independent contractors, providing them with certain rights, including a written contract, timely payment, and safeguards against retaliation. The law also contemplates specific legal recourse for aggrieved freelancers and sets forth available remedies, including double damages, injunctive relief and attorneys' fees. The new legislation, which has been described as "first-of-its kind" in the United States, becomes effective on May 15, 2017, and will apply to transactions with independent contractors after that date. Highlights of the new law include:

Covered Persons

The Act defines "freelance worker" as "any natural person or any organization composed of no more than one natural person, whether or not incorporated or employing a trade name . . . hired or retained as an independent contractor by a hiring party to provide services in exchange for compensation." The law expressly excludes from this definition certain lawyers, licensed health care professionals and/or sales representatives.

Written Contract:

The Act requires a hiring party to sign a freelance worker to a written agreement if the amount of the services provided is $800 or more, either by itself or when aggregated with all services provided for the preceding 120 days. The contract must, among other things, itemize all services the freelance worker will provide, the value of the services, the rate and method of compensation, and the date on which the freelance worker must be paid, or the "mechanism" by which such date will be provided. The new measure further provides that the Director of the Office of Labor Standards may require additional terms. Significantly, the parties to such contracts may not waive their rights under the proposed law in such contracts, and any provision purporting to constitute such waiver will be deemed void as a violation of public policy.

Prohibited Payment Practices

The Act also prohibits certain payment practices. If the contract fails to specify the date or mechanism for determining the date payment is due, payment must be provided "no later than 30 days after the completion of the freelance worker's services under the contract." Once a freelance worker has begun work under the contract, the hiring party may not "require as a condition of timely payment that the freelance worker accept less compensation than the amount of the contracted compensation."

Retaliation

The new law also prohibits retaliation. Under the Act, retaliation includes threats, intimidation, harassment, denial of a work opportunity, or discrimination against a covered worker or any act "reasonably likely to deter a freelance[] worker from exercising or attempting to exercise any right guaranteed under this chapter, or from obtaining future work opportunity because the freelance worker has done so."

Remedies

Aggrieved freelancers may bring a civil action in any court of competent jurisdiction for the damages contemplated by the proposed new law. Any action alleging a violation of section 20-928 (right to a written contract) must be brought within two (2) years after the alleged violation occurred. Any action alleging violation of sections 20-929 (payment practices) or 20-930 (retaliation) must be brought within six (6) years after the alleged violations. A freelancer who alleges only a violation of the right to a contract under section 20-928 must prove that he or she requested a written contract before the contracted work began. The damages available to a freelancer who prevails in a civil action are as follows:

  • An award of reasonable attorney's fees and costs in all instances.
  • On a claim alleging a violation of section 20-928 (right to a written contract), statutory damages of $250;
  • On a claim alleging a violation of 20-928 and on one or more claims under other provisions of the new law, statutory damages equal to the value of the underlying contract for the violation of section 20-928 in addition to the remedies specified for other violations;
  • On a claim alleging a violation of section 20-929 (unlawful payment practices), an award for double damages, injunctive relief and other such remedies as may be appropriate; and
  • On a claim alleging a violation of section 20-930 (retaliation), statutory damages equal to the value of the underlying contract for each violation arising under such section.

In addition to the above relief, the bill provides that the New York City Office of the Corporation Counsel may commence an action within six (6) years after the alleged violation occurred if "reasonable cause exists to believe that a hiring party is engaged in a pattern or practice" of violating the law. The Corporation Counsel may request relief, including injunctive relief, civil penalties and any other appropriate relief. Further, the trier of fact may impose a civil penalty up to $25,000 for a finding that a hiring party has engaged in a pattern or practice of violations. Civil penalties awarded to Corporation Counsel are to be paid into the City's general fund.

Implications for Employers

The implications of the Freelance Isn't Free Act on hiring parties subject to it are potentially profound, requiring formal, written contracts for work relationships that employers might previously have handled through so-called "handshake deals." The Act clearly contemplates "pattern and practice" cases against companies that continue to routinely handle matters through verbal arrangements that now require formal contracts. Thus, understanding whether a hiring party may or may not be subject to the new law is critical. Indeed, a hiring party may mistakenly believe that it is not subject to the Act if the independent contractor operates as a limited liability company or under a trade name and does not disclose that it is in fact a single-individual operation.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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
Jonathan A. Trafimow
James P. Chou
 
In association with
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
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). 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 & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd 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 or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.