On May 15, 2017, New York City continued its rapid expansion of worker protection, this time creating greater security for independent contractors. The "gig" economy appears to be taking on the encumbrances of the traditional management-labor relationship. The Freelance Isn't Free Act ("FIFA") has now taken effect, imposing new requirements on business that utilize freelancers. In engaging freelance workers, a company must now comply with the following:

  • Written Contract – Any independent contractor who provides services valued at $800 or more is entitled to a written contract.
  • Timely Payment – Any independent contractor who provides services must be paid on time and in full within 30 days of completion of the work.

The new law defines a "freelance worker" as any person hired or retained as an independent contractor to provide services in exchange for compensation. Also included in that definition are any organizations by which a single individual operates under a trade name or is otherwise incorporated. The law specifically exempts sales representatives, as defined by the New York Labor Law, attorneys, and licensed medical professionals.

The damages for violating this law can be severe. Prior to passage of this Act, independent contractors who were not timely paid or were not paid in full for their work could bring a breach of contract lawsuit for the value of the contract alone. Now, employers are exposed to damages akin to those under federal and state wage and hour laws, such as the Fair Labor Standards Act ("FLSA") and the New York Labor Law ("NYLL"). Specifically:

  • Employers that do not pay a freelance worker in full within 30 days of completion of the work are liable for double damages, similar to the liquidated damages provisions of the FLSA and NYLL;
  • Employers who do not execute a written contract even after a request from the freelance worker are liable for a $250 penalty;
  • An employer that violates any FIFA provision is liable for the attorneys' fees and costs of the freelance worker who has to file suit to recover for the work performed.

FIFA provides two avenues for freelance workers to bring their claims – a lawsuit in any court of competent jurisdiction or a complaint to the City's Office of Labor Standards. Serial violators of the law are subject to a civil action brought by the Corporation Counsel of the City of New York for a civil penalty up to $25,000. We anticipate that independent contractors will have no difficulty retaining counsel to prosecute their claims even when the amounts at issue are low in view of the ability to recover attorneys' fees and costs of suit.

Employers must act now in order to protect themselves, including reviewing all engagements with independent contractors, preparing new contracts, and assessing payroll policies to ensure that freelance workers are paid in full within 30 days of completion of their assignment. Contracts should be crafted carefully to be limited to the specific engagement and not give rise to any ongoing obligation to utilize and pay the contractor, and they should be clear that the contractor is not an employee.

The New York employment lawyers of Lewis Brisbois are available to assist with respect to compliance with this new law and the myriad of other employment laws and regulations facing employers.

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