The use of independent contractors (or “freelance workers”) has been increasing and there has historically been little statutory protections for this part of the workforce. In November 2023, Governor Kathy Hochul signed the “Freelance Isn’t Free” Act into law. The Act requires written contracts with independent contractors, provides protections against discrimination and retaliation, and contains enforcement provisions for violations of the Act.
The Act was originally codified in the New York Labor Law, which is enforced by the Department of Labor. However, the Act was amended to remove it from the Labor Law and codify it in Article 44-A of the New York General Business Law, which is enforced by the Attorney General.
In a press release regarding the Act, Governor Kathy Hochul stated: “Every single New Yorker deserves to be treated with dignity and respect in the workplace, whether they’re a full-time, part-time or freelance worker. As freelance work becomes more and more common, we need laws that have strong protections to ensure these individuals are paid fairly for the work they do. This new law is a major step forward for this critical sector of our workforce.”
What was the Act’s effective date and what does it cover?
The Act’s effective date was August 28, 2024, and it applies to a “freelance worker . . . that is hired or retained as an independent contractor by a hiring party to provide services in exchange for an amount equal to or greater than eight hundred dollars, either by itself or when aggregated with all contracts for services between the same hiring party and freelance worker during the immediately preceding one hundred twenty days.” A “freelance worker” is “any natural person or organization composed of no more than one natural person.” NY CLS Gen Bus § 1410(3). A “hiring party” is “any person who retains a freelance worker,” but does not include federal, state, or local governments and agencies.
Are there any exclusions?
The Act excludes contracts with (1) sales representatives, (2) attorneys, (3) licensed medical professionals, and (4) construction contractors. NY CLS Gen Bus § 1410(3)(a)-(d).
What are the contractual requirements?
The Act requires hiring parties to enter into agreements with freelance workers and to provide a copy of the contract to the freelance worker either physically or electronically. NY CLS Gen Bus § 1412(1). The contract must contain the following:
- the name and mailing address of both the hiring party and the freelance worker
- an itemization of all services to be provided by the freelance worker, the value of the services to be provided pursuant to the contract, and the rate and method of compensation
- the date on which the hiring party must pay the contracted compensation or the mechanism by which such date will be determined
- the date by which a freelance worker must submit a list of services rendered (i.e., the deadline for submitting invoices). NY CLS Gen Bus § 1412(2)(a)-(d)
The compensation described in the contract must be paid on the date the compensation is due under the terms of the contract or, if the contract is silent on the payment date, then no later than 30-days after completion of the services. NY CLS Gen Bus § 1411(1)(a)-(b).
What are the records retention requirements?
Contracts under the Act must be retained for 6 years and must be made available to the New York Attorney General upon request. Notably, in the absence of a contract, the Act provides a presumption that the terms provided by a freelance worker are the agreed upon terms. NY CLS Gen Bus § 1412(3).
Does the Act prohibit discrimination, harassment, and retaliation?
The Act specifically prohibits discriminating, harassing, or retaliating against a freelance worker because the individual has exercised any rights under the Act. NY CLS Gen Bus § 1413.
Who enforces the Act and what are the potential penalties for violating the Act?
The New York State Attorney General enforces the Act and individuals may file complaints with the Attorney General alleging violations of the Act. The Attorney General “may bring an action in the name and on behalf of the people of the state of New York to enjoin such unlawful acts or practices and to obtain restitution for one or more freelance workers of any moneys or property obtained directly or indirectly by any such unlawful acts or practices.” Civil penalties up to one thousand dollars for a first violation, two thousand dollars for a second violation, or three thousand dollars for a third or subsequent violation may be sought by the Attorney General. NY CLS Gen Bus § 1414(1).
Does the Act provide for a private cause of action?
Yes. Individuals can bring a lawsuit to enforce their rights. CLS Gen Bus § 1414.
There is a six-year statute of limitations for claims arising under Section 1411 (timing of payments). Damages for non-payment claims include the amount owed, reasonable attorneys’ fees and costs, double damages, injunctive relief, and “other such remedies as may be appropriate.”
There is also a six-year statute of limitations for claims arising under Section 1413 (discrimination and retaliation) and damages include statutory damages equal to the value of the underlying contract for each violation.
The statute of limitations for claims related to the existence of a written contract (Section 1412) is two-years and, in addition to other damages under the Act, a prevailing plaintiff is awarded $250 in statutory damages.
If the trier of fact in a civil action determines an employer has engaged in a “pattern or practice” of violations, civil penalties of up to $25,000 may be issued.
Did New York provide a model agreement?
Yes, the New York State Department of Labor provided a model Freelance Worker Agreement at https://dol.ny.gov/freelance-isnt-free-act. It is important to note that use of the state’s model agreement does not establish an independent contractor relationship. Whether an individual is an independent contractor or an employee depends on a variety of factors, and can vary based on the statute involved and/or the government agency or court making the classification determination. The Act specifically states: “No provision of this article relating to freelance workers shall be construed as providing a determination about the legal classification of any such worker as an employee or independent contractor.” NY CLS Gen Bus § 1415(4).
What should companies do now?
Companies who utilize independent contractors should review existing templates to ensure compliance with the Act. Companies should also review existing and future contracts to be sure the contract terms accurately reflect the relationship of the parties. This also provides a good opportunity for companies to work with their legal counsel to confirm individuals are properly classified as independent contractors (as opposed to employees).
Further Information:
Visit our “Your Morning Briefing” webinar series page for more on-demand information about New York State’s “Freelance Isn’t Free” Act and other current topics in employment law.
If you have further questions, please contact a member of the HSE Labor and Employment team.