New York City Shakes Up the Freelance Sector10/23/2017 | By: David S. Douglas, Esq. | GDB 2017 Fall Newsletter
New York City has substantially altered the ground rules governing companies and individuals who utilize independent contractors. The Freelance Isn’t Free Act – enacted in May and the first of its kind in the nation – imposes severe penalties on those who retain the services of independent contractors without written agreements. The Act also provides independent contractors who are not properly paid with strong remedies, including the right to recover double damages and attorneys’ fees.
The new law requires that where an independent contractor is retained to perform services valued at $800 or more the agreement between the parties must be in writing. Hiring parties cannot avoid the written contract requirement by structuring their independent contractor relationships as a series of smaller value transactions. Rather, in assessing the value of the services at issue, the law takes into account the aggregate value of any arrangements between the parties over the course of the immediately preceding four months.
The Act makes clear that full payment must be made to the independent contractor either by the date that such payment is due under the parties’ agreement, or, if the agreement does not set forth such a date, by no later than 30 days after the work under the contract is completed. The Act prohibits the hiring party from requiring as a condition of timely payment that the independent contractor accept less compensation than the contractually agreed-upon amount.
Additionally, the Act bans retaliation, which it defines as any attempt by a hiring party to exert pressure on an independent contractor for purposes of convincing the independent contractor to forgo his or her rights under the Act.
Damages and Penalties
Where a hiring party violates any of these provisions, the independent contractor may sue and obtain a considerable recovery against the hiring party. Most notably, the Freelance Isn’t Free Act gives the independent contractor the right to recover not only damages equal to twice the amount owed, but also attorneys’ fees, remedies that previously had been available only to actual employees. A hiring party found to have retaliated against an independent contractor is further liable for damages that equal the total value of the underlying contract. The Act permits independent contractors to file complaints with the Office of Labor Standards as an alternative to commencing suit in court.
The Act also establishes a $250 penalty for entering into an independent contractor arrangement without a written contract where the independent contractor had requested it be in writing. Any hirer found to have repeatedly violated the Freelance Isn’t Free Act’s requirements may be subject to an additional civil penalty of up to $25,000 as part of a suit brought by New York City Corporation Counsel.
The Freelance Isn’t Free Act governs the engagement of any person or organization as an independent contractor, where either the employer or independent contractor has ties to New York City. The law, however, does not apply to the retention of commission salespersons, lawyers, licensed medical professionals, or independent contractors who are performing work for government entities.
Anyone in the New York City area who has utilized or is considering utilizing the services of independent contractors (or anyone across the country looking to retain New York City-based independent contractors) should consult with an experienced employment attorney to analyze exactly how to structure these arrangements. Through careful consideration of written contract terms and payment provisions, and adherence to them, one should be able to avoid running afoul of the new restrictions that New York City has imposed, and at the same time maintain the added flexibility and economic benefits generally associated with engaging independent contractors.