There's big news for employers with offices in New York City. On October 27, 2016, New York City became the first city in the country to pass a law providing legal protections against nonpayment to a group of workers who previously did not have them — independent contractors. The City Council passed the bill — the "Freelance Isn't Free Act" — unanimously, and it is expected to go into effect 180 days after it is signed by Mayor de Blasio. Here's what you need to know.
Background
New York City is considered to be the hub of a rapidly expanding group of freelance workers, and recent surveys estimate that approximately 38% of New York City's workforce currently consists of independent contractors. Previously, independent contractors with potential nonpayment claims were left with the sole remedy of asserting a breach of contract claim in court.
Employer obligations
The "Freelance Isn't Free Act" provides significant new protections, requiring that any "hiring party" (defined as a person who retains a freelance worker):
- Enter into a written contract if the value of services will be $800 or more including aggregated services within a 120 day period. The contract must itemize the services, state the value and rate and method of compensation, and identify a date of payment. If a contract does not state a payment date, payment will be due no later than 30 days after the contractor completes services.
- May not condition timely payment on a reduction of pay once the contractor begins work.
Contractor remedies
Contractors who have not been timely paid have two remedies. First, they will be able to submit a written complaint to the Director of the Office of Labor Standards. The Director will alert the hiring party of the complaint and ask for proof of payment or a written response. The Director will be available to provide contractors with information about court forms and procedures, and about organizations that can refer attorneys. Second, contractors will be able to file in court a claim for nonpayment or for retaliation. Significantly, prevailing contractors will be entitled not only to unpaid amounts due under their contract, but also to double damages and attorneys' fees. Contractors who can prove that they requested a contract and did not receive one, or that they were retaliated against for exercising their rights under the Act, may also be entitled to seek so-called "statutory damages" equal to the amount of the contract.
The Act will also empower the New York City Corporation Counsel to sue employers with a "pattern or practice" of violating the Act for additional penalties of up to $25,000.
With significant protections for independent contractors on the horizon, it's not too soon to review and, if necessary, revise your business practices to ensure the use of proper contracts, and to track payment deadlines and procedures.
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