Freelance Isn’t Free Act Imposes Additional Duties Upon Businesses Contracting With NYC Freelancers

New York City has adopted a novel ordinance, known as the Freelance Isn’t Free Act (the “Act”), requiring employers and individual independent contractors (a/k/a freelancers) to reduce to writing any single agreement with a value of $800 or more, as well as agreements which, when combined with prior agreements between the parties in the preceding 120 days, have an aggregate value of $800 or more.
 
The written agreement must include:

• The name and mailing address of both parties;
• An itemization of services to be provided by the freelance worker, the value of the services, and the rate and method of compensation; and
• Either a date certain upon which payment is to be made or the mechanism by which such date will be determined.

The Act becomes effective May 15, 2017. The text is available here. As of that date, individuals and businesses engaging freelancers for services valued at $800 or more must provide each freelancer with a copy of the operative agreement. Failure to comply with these requirements may result in statutory damages of $250, plus attorney’s fees and costs.

The Act also requires businesses to pay freelancers in accordance with the terms of the written agreement, or, if the agreement is silent as to the time of payment, within 30 days of completion of services. The Act also prohibits businesses from conditioning timely payment on the freelancer’s agreement to accept less than the agreed-upon payment amount. Failure to comply with these provisions may result in an award of double damages, in addition to attorney’s fees and costs.

The Act also prohibits businesses from retaliating against freelancers for exercising rights under the Act. A freelancer who shows that a business retaliated against him or her by declining to award a contract is entitled to damages equal to the value of the that contract, plus attorney’s fees and costs.

Scope of Coverage

The Act defines a “freelance worker” as any individual or business entity being used by an individual retained as an independent contractor. The Act exempts sales representatives, attorneys and medical professionals from its scope of coverage, and does not include business entities with multiple employees. A “hiring party” is anyone (including individuals) using freelance workers, except for foreign, federal, state or local government entities.

Enforcement

An aggrieved individual may either file a complaint with the New York City Office of Labor Standards within two years of the alleged violation, or commence a civil action in court within (i) two years of a hiring party’s alleged failure to provide a written freelance agreement, or (ii) six years of a hiring party’s alleged failure to pay or retaliatory act. A hiring party’s failure to respond to a complaint filed with the Office of Labor creates a rebuttable presumption that it engaged in the acts alleged in that administrative proceeding, which the freelancer may then use in support of a subsequent legal proceeding in court.

Practical Advice

The Act does not have retroactive effect, which means that freelance agreements or arrangements entered into prior to the effective date of the Act are not subject to its requirements. However, New York City businesses are nonetheless advised to conduct an internal review of their relationships with freelancers to ensure compliance with the Act as of the effective date. As of May 15, 2017, freelance agreements should identify with specificity the services to be provided, and should include a detailed protocol for the resolution of disputes concerning those services.

These agreements should also set forth specific conditions that must be met (including, for example, the freelancer’s tender of detailed invoices) in order for fees to be due and owing. Also, in light of the Act’s 120-day lookback period, businesses should not assume that freelance agreements valued at less than $800 are not subject to the requirements of the Act. Instead, businesses should review agreements entered into with a given freelancer within the prior 120 days (including within the 120-day period immediately preceding the May 15, 2017 effective date) to determine whether, in aggregate, the $800 threshold has been met.

Finally, businesses should train employees with authority to enter into freelance agreements on the requirements of the Act in advance of the May 15, 2017 effective date.