The Freelance Isn’t Free Act Explained Cohen, Weiss and Simon LLP January 2017
Table of Contents 1. Why was the Freelancer Isn’t Free Act (“Act”) Passed? 2. The Terms of the Act 1. Coverage 2. The Freelancer Contract 3. Unlawful Payment Practices 4. Enforcement 5. Other Provisions 3. When and Where will the Act take Effect? 4. Further questions? 2
Why was the Act passed? • On October 27, 2016, the New York City Council passed the Freelance Isn’t Free Act; the Mayor signed the Act into law on November 16, 2016 • The Council acted because independent workers struggle with nonpayment and delayed payment without adequate legal recourse • The Act is the first law in the United States to establish enhanced protections for freelance workers – Although “employees” have been protected by laws against wage theft for almost a century, “independent contractors” had no such protection – This Act provides enhanced legal recourse to freelance workers not paid properly by their clients 3
Terms of the Act: Coverage • Who is a freelance worker? – Any person or organization composed of one person • i.e., one-person shops only; can’t employ other workers – Can be incorporated or use a trade name – That is retained as an independent contractor – By a hiring party to provide services for compensation – But not including: • Sales representatives • Lawyers • Doctors • Those hired by the government 4
Terms of the Act: The Contract • If a party hires a freelance worker to perform services of $800 or more, the Act requires that the contract be in writing – Aggregates all contracts between the parties over the last 120 days – The “writing” need not be a formal contract – it can be an email, a letter, an advertisement, or a text message – Best practice: The freelance worker should, in writing, request a written contract. Failure to do so restricts the freelancer’s remedies • Both parties must retain a copy of the contract 5
Terms of the Act: The Contract (con’t) • The contract, at a minimum, must include: – Name and mailing address of both parties – Itemization of all services – Value of the services – Rate and method of compensation – Date of payment or mechanism to determine such date – Other terms as may be designate by the Office of Labor Standards 6
Terms of the Act: Unlawful Practices • The Act requires that the freelancer be paid either: – On or before the date in the contact, or – If not specified in the contract, no later than 30 days after completion of the services • Once work begins, a hiring party may not as a condition of timely payment require that the freelancer accept reduced compensation • Retaliate against a freelancer for exercising his or her rights under the Act – Retaliation includes threats, intimidation, discipline, harassment, discrimination, denial of a work opportunity, or other similar action – This includes blacklisting or discrediting the freelancer to other hiring parties – It may also be prohibited retaliation if a hiring party cancels the agreement in response to a request to put the contract in writing 7
Terms of the Act: Enforcement • Before the Act, the only real enforcement option for freelance workers was suing in small claims or civil court, where attorney’s fees were not recoverable • That has changed • The Act significantly enhances both the avenues for relief and the damages for non-payment • Now, a stiffed freelancer can: – File complaint with the NYC Office of Labor Standards (OLS), or – File a lawsuit in state court with enhanced remedies 8
Terms of the Act: Enforcement • If a freelancer files with OLS: – Must file within two years of violation – On a template complaint to be crafted by OLS – Within 20 days, OLS informs hiring party of complaint – Within 20 days, hiring party must respond • If hiring party fails to respond, that creates a rebuttable presumption in any lawsuit that the hiring party committed the alleged violations • Hiring party must state either reasons for non-payment or that freelancer has been paid in full – Within 20 days, OLS sends the hiring party’s response to freelancer and informs freelancer of right to bring a lawsuit – OLS filing is not a prerequisite to a lawsuit, but freelancer cannot do both simultaneously; if file with OLS, must go through process before then filing a lawsuit 9
Terms of the Act: Enforcement • The freelancer can also file a lawsuit in state court • Statute of limitations: – 2 years for violation of written contract requirements – 6 years for all other violations (unlawful payment or retaliation) • Damages available include: – Reasonable attorney’s fees and costs for any violation – Double damages and injunctions for unlawful payment – $250 for violation of written contract requirements (if the freelancer requested a written contract) • If, however, there is a violation of the written contract requirements and another violation of the Act, instead of $250, the damages are “equal to the value of the underling contract” – Retaliation: damages equal to value of contract 10
Terms of the Act: Other Provisions • For pattern and practice violations, the NYC corporation counsel may file for injunctive relief and a $25,000 penalty • Any contract purporting to waive rights in the Act is void • The OLS is to set up a “navigation” program to provide: – General court information and information about the Act – Information about available templates and court forms – Information about employee v. independent contractor classification – Outreach and education to the public – Not legal advice – A list of organizations to identify attorneys 11
When and Where? • When will the Act take effect? – May 15, 2017 • Where does the Act apply? – in New York City only – What if one or more of the parties is outside of NYC? Or if the work is done remotely outside of NYC? • The courts will need to determine whether the Act applies in these circumstances • The more contacts with NYC, the more likely the Act is to apply 12
Questions? • If you have any further questions, feel free to contact us: 13
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