The Freelance Isn’t FreeAct 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?

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Why was the Act passed?

• On October 27, 2016, the New York City Council passed theFreelance Isn’t Free Act; the Mayor signed the Act into law onNovember 16, 2016

• The Council acted because independent workers struggle withnonpayment and delayed payment without adequate legalrecourse

• The Act is the first law in the United States to establishenhanced protections for freelance workers

– Although “employees” have been protected by laws against wage theft foralmost a century, “independent contractors” had no such protection

– This Act provides enhanced legal recourse to freelance workers not paidproperly by their clients

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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

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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 inwriting

– Aggregates all contracts between the parties over the last 120days

– The “writing” need not be a formal contract – it can be an email, aletter, an advertisement, or a text message

– Best practice: The freelance worker should, in writing, request awritten contract. Failure to do so restricts the freelancer’sremedies

• Both parties must retain a copy of the contract

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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

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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 aftercompletion of the services

• Once work begins, a hiring party may not as a conditionof timely payment require that the freelancer acceptreduced compensation

• Retaliate against a freelancer for exercising his or herrights 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 otherhiring parties

– It may also be prohibited retaliation if a hiring party cancels theagreement in response to a request to put the contract in writing

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• Before the Act, the only real enforcement option forfreelance workers was suing in small claims or civilcourt, where attorney’s fees were not recoverable

• That has changed

• The Act significantly enhances both the avenues forrelief 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

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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 inany lawsuit that the hiring party committed the alleged violations

• Hiring party must state either reasons for non-payment or thatfreelancer has been paid in full

– Within 20 days, OLS sends the hiring party’s response tofreelancer and informs freelancer of right to bring a lawsuit

– OLS filing is not a prerequisite to a lawsuit, but freelancer cannotdo both simultaneously; if file with OLS, must go through processbefore then filing a lawsuit

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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 freelancerrequested a written contract)

• If, however, there is a violation of the written contract requirements andanother violation of the Act, instead of $250, the damages are “equal tothe value of the underling contract”

– Retaliation: damages equal to value of contract

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Terms of the Act: Enforcement

Terms of the Act: Other Provisions

• For pattern and practice violations, the NYC corporationcounsel may file for injunctive relief and a $25,000penalty

• 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 contractorclassification

– Outreach and education to the public

– Not legal advice

– A list of organizations to identify attorneys

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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 thework is done remotely outside of NYC?

• The courts will need to determine whether the Act applies in thesecircumstances

• The more contacts with NYC, the more likely the Act is to apply

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Questions?

• If you have any further questions, feel free to contact us:

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