New York Enacts Protections for Freelance Workers

• New York State recently passed the Freelance Isn’t Free Act, which imposes various payment, recordkeeping, and anti-discrimination requirements on companies that hire independent contractors or freelancers.
• The law applies to “freelance workers” which is defined very broadly.
• The new obligations apply to contracts with covered freelance workers entered into on or after May 20, 2024.

Despite previously vetoing the legislation, Governor Kathy Hochul signed the Freelance Isn’t Free Act (the “Act”) into law on November 22, 2023. The Act is similar to New York City’s law bearing the same name, which has been in effect since 2017. This legislation, effective May 20, 2024, seeks to expand protections for “freelance workers” (i.e., independent contractors), as defined below, and imposes various requirements on individuals and companies that hire freelance workers.

Freelance Worker Defined

The Act defines “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.” Importantly, certain licensed practicing lawyers, construction contractors, licensed medical professionals, and sales representatives are specifically excluded from protections under the Act.

Who is Subject to the Requirements of the Act?

Any “hiring party” must abide by the new requirements. The Act defines “hiring party” as any person who retains a freelance worker to provide any service. Under this broad definition, all natural persons and companies of any size and type are covered under the Act. Notably, the new law does not apply to federal, state, and local governments.

New Written Contract Requirement

Under the new law, the hiring party must enter into a written contract with the freelance worker and the contract must include:

• the parties’ names and mailing addresses;
• an itemization of all services to be provided by the freelance worker;
• the value of services to be provided;
• the rate and method of compensation;
• the date when the hiring party must pay the contracted compensation or the mechanism by which such date will be determined; and
• the date by which the freelance worker must submit a list of services rendered to the hiring party to meet any internal processing deadlines of such hiring party for compensation to be paid by the agreed-upon date.

Notably, the New York State Department of Labor’s (“NYDOL”) Commissioner may require additional terms be included in the written contracts and is to publish model contracts for the convenience of both hiring parties and freelance workers. As of today’s date, the Commissioner has not yet issued any model contracts.

The hiring party is required to furnish a copy of the contract, either electronically or physically, to the freelance worker and maintain a copy of the contract in its records for six years following the execution date. 

Payment Obligations

The Act specifies that payment shall be made to the freelance worker by the date payment is due under the terms of the contract. If no payment date is specified, then the hiring party shall remit payment no later than thirty days after the completion of the freelance worker’s services under the contract. Once a freelance worker has begun performance, the Act forbids the hiring party from requiring that the freelance worker accept less compensation than the amount contracted for in order for the freelance worker to receive timely payment.

Anti-Discrimination/Retaliation Protections

The new law prohibits any hiring party from discriminating, harassing, threatening, intimidating, disciplining, or denying work opportunities to a freelance worker for exercising, or attempting to exercise, any rights under the Act.

Penalties and Remedies for Violations

The Act allows a freelance worker to either file a complaint with the NYDOL or initiate a civil action in any court of competent jurisdiction for damages. If a complaint is filed with the NYDOL, the NYDOL is authorized to:

• investigate the complaint;
• impose civil and criminal penalties on the hiring party;
• take assignments of claims from freelance workers for amounts owed to them;
• sue hiring parties on such assigned claims;
• join in a single action any number of wage claims against the same hiring party; and
• enter into reciprocal agreements with authorities in other states to enforce the protections of the law.

If a freelance worker decides to initiate a lawsuit against the hiring party in court, the freelancer may recover double damages (i.e., 200% of the underpayment), injunctive relief, reasonable attorneys’ fees and costs, and such other relief as may be appropriate.  A violation of the Act’s anti-retaliation provision can also warrant recovery of statutory damages equal to the value of the underlying contract for each violation. 

Lastly, if there is reasonable cause to believe a hiring party is engaged in a pattern or practice of violations of the Act, the New York Attorney General can initiate a civil action on behalf of the State seeking injunctive relief, civil penalties of not more than $25,000, and any other appropriate relief against the hiring party.

The statute of limitations for failure to provide a written contract is two years, while the statute of limitations for non-payment of the contractor or for retaliation is six years.

Takeaway

The Act highlights New York’s emphasis on extending greater protections to freelance workers.  Any person or company doing business in New York should ensure that they reduce all agreements with freelance workers to writing and that they comply with all payment requirements of the Act.

Significantly, regardless of the Act, employers are not permitted to mischaracterize employees as freelancers or independent contractors. It is imperative for employers to ensure that they are properly categorizing their workers as either employees or independent contractors. A finding that a worker is improperly classified as an independent contractor can result in liability for various employment claims and the federal and state governments may assess additional penalties for misclassification, including possible criminal charges. Employers should consult with counsel to make an informed decision when designating workers as employees or independent contractors.