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Employment Law Update: New York’s Freelance Isn't Free Law: What NY Employers Need to Know

On August 28, 2024, New York State’s Freelance Isn’t Free Law (“FIFL”) took effect, extending protections to freelance workers statewide. This sweeping law is codified in a new Article 44-A to New York State’s General Business Law, ensuring clear expectations for both independent contractors and the organizations that engage them throughout New York State.[1]

The Evolution of Freelancer Protection

The Freelance Isn't Free Law is a direct descendant of New York City's pioneering Freelance Isn't Free Act (“FIFA”), enacted in May 2017, as the first of its kind in the United States. New York City's landmark legislation established a freelance worker's right to a written contract for services totaling $800 or more, prompt and full payment, and protection from retaliation, with significant penalties for violations. The statewide law expands upon New York City's FIFA, introducing higher contract thresholds, a broader geographic scope (and therefore, protection to a greater number of freelance workers), formal enforcement protections, and additional record-keeping requirements for hiring parties.

Key Features of the Statewide Law

The law defines a “freelance worker" as “any natural person or organization composed of no more than one natural person…hired… as an independent contractor by a hiring party to provide services in exchange for an amount equal to or greater than $800, either by itself or when aggregated with all contracts for services between the same hiring party and freelance worker during the immediately preceding 120 days.” The term does not include: (a) sales representatives, as defined in New York’s Labor Law section 191-a, (b) practicing lawyers in good standing of the bar, (c) licensed medical professionals; or (d) construction contractors. A “hiring party” is any person who retains a freelance worker to provide any service, other than the federal, state or local government, or any foreign government.

The law mandates that:
 

•  the hiring party provide to the freelance worker (“freelancer”) a copy of the written contract for freelance work valued at $800 or more, either $800 by itself, or when combined with other contracts with the same hiring party within a 120-day period;
•  the hiring party make timely payment to a freelancer, on or before the date compensation is due under the contract terms OR within 30 days of service completion, if not specified;
• once a freelancer has started performance of the services under the contract, the hiring party may not require as a condition of timely payment that the freelancer accept less compensation than the amount contracted for; and
•  the hiring party keep a copy of the contract for at least six years and make it available to the Attorney General upon request.

The contract must include: (1) The names and mailing addresses of both parties; (2) An itemization of all services to be provided; (3) The value of each service; (4) The rate and method of compensation; (5) The date on which the hiring party must pay the contracted compensation or the mechanism by which such date will be determined; and (6) The date by which a freelance worker must submit a list of services rendered under such contract to the hiring party to meet any internal processing deadlines of such hiring party for timely compensation.

Nonprofits Must Take Note

Nonprofit organizations are not exempt from this law. They must adhere to the same standards as for-profit entities, ensuring they draft clear contracts, pay on time, and keep detailed records of freelance engagements.

Discrimination/Retaliation Prohibited

The law also protects freelancers from discrimination and retaliation. Specifically, the law prohibits discriminating against, or taking any action that penalizes a freelancer for, or is reasonably likely to deter a freelancer from, exercising or attempting to exercise their rights, or from getting future work because the freelance worker has done so.

Remedies for Violation of the Law

Freelancers who believe their rights have been violated under Article 44-A of New York State’s General Business Law can bring suit in court. Penalties for violation of the law include statutory damages, double damages, injunctive relief, attorney's fees and “other such remedies as may be appropriate.” A civil penalty of up to $25,000 may be imposed too in court by a trier of fact where there is evidence of a pattern or practice of a violation of the law. The New York State Attorney General also has the authority to investigate complaints of a violation of this law and provide appropriate remedies.
 
Model Contract

New York State’s Department of Labor has issued a model contract that hiring parties may choose to use which can be found at: https://dol.ny.gov/system/files/documents/2024/08/freelance-worker-agreement.pdf.

Actionable Tips for Hiring Entities

To navigate this legal landscape with confidence, individuals and businesses hiring freelancers in New York State may want to consider taking the following proactive steps:
 

• Review and Revise Contracts: Ensure that all freelance contracts are in writing and comply with the new law's requirements. Contracts should clearly outline the scope of work, rate of pay, and payment terms.
• Educate Your Team: Train your staff on the nuances of the law. Everyone involved in hiring and managing freelancers should understand the importance of compliance.
• Implement Robust Record-Keeping: Develop a system to keep detailed records of all freelance engagements, including signed contracts and payment documentation.
• Consult with Legal Counsel: In reviewing your existing freelance contracts, you may want to determine with your legal counsel, as a threshold question, whether the freelancer is properly classified as an independent contractor (rather than an employee). While this article provides an overview, the complexities of legal compliance are best navigated with your legal counsel.
• Monitor Legislative Updates: Stay informed about any further amendments or guidance issued by New York State to avoid any compliance missteps.

 
Whiteford’s Labor & Employment Law Section can assist with reviewing and updating your freelancer agreements and training your staff who engage freelancers to ensure compliance with the law.