New York State's "Freelance Isn't Free Act" (the "State FIFA") took effect on August 28, 2024. Similar to New York City's "Freelance Isn't Free Act" (the "City FIFA"), which took effect in 2017, the State FIFA extends rights to freelance workers across the state to ensure that they obtain a written contract, are compensated for all services performed in a timely manner, and are protected from discrimination. Many employers in New York have been operating under the requirements of the City FIFA for the last seven years, so complying with the State FIFA will not be a radical change for them. However, now that the State FIFA is in effect, all employers in New York who engage freelance workers must become familiar with the new law and ensure compliance.
Below is a summary of the key points of the State FIFA that New York employers need to know.
Who does the State FIFA cover?
The State FIFA applies to any "hiring party," which is defined as any person who hires a freelance worker, with the exception of governmental entities, such as the United States, New York State, any municipality, and foreign governments.
A "freelance worker" is defined as a natural person, or an organization that is comprised of no more than one person, who is retained for services equaling to $800 or more, either by itself or for all services aggregated within the immediately preceding 120 days. Therefore, if a hiring party is engaging a freelance worker for multiple smaller projects over the course of 120 days, the hiring party should tally the value of the services provided to determine whether the State FIFA applies. Note that certain positions are not considered freelance workers, including sales representatives (as defined by the New York Labor Law), attorneys, licensed medical professionals, and construction contractors (as defined by the State FIFA).
What are the State FIFA requirements for written contracts with freelance workers?
The written 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;
- 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; and
- the date by which a freelance worker must submit a list of services rendered under the contract to the hiring party to meet the hiring party's internal processing deadlines so that payment can be processed by the agreed-upon date in the contract.
Whenever a hiring party retains the services of a freelance worker, the hiring party must furnish a copy of the written contract, either physically or electronically, to the freelance worker and both parties must retain a copy. The State FIFA requires that the Commissioner of Labor create and publish model contracts, at no cost, for the general public's use. As of the date of this alert, no model contracts have been released.
The hiring party must maintain a copy of any written contracts with freelance workers for at least six years, and must make them available to the Attorney General ("AG") upon request. Otherwise, if the freelance worker decides to file a complaint with the AG, as discussed further below, the AG will presume that the terms presented by the freelance worker are the terms that both parties agreed to.
When is payment required?
Hiring parties are required to pay freelance workers as follows:
- on or before the date such compensation is due under the terms of the contract; or
- if the contract does not specify a specific date or a mechanism by which a date can be determined, then no later than 30 days after the completion of the freelance worker's services under the contract.
Note that once a freelance worker starts performing the services under the contract, the hiring party may not require that the freelance worker accept less compensation than what is stated in the contract as a condition of receiving timely payment (i.e., freelance workers must be paid in full and on time).
Does the State FIFA provide any other protections for freelance workers?
Yes, the State FIFA also prohibits discrimination. Hiring parties may not penalize a freelance worker for, or take any action that could reasonably deter a freelance worker from, exercising or attempting to exercise any right provided to them by the State FIFA. Prohibited actions include threatening, intimidating, disciplining, or harassing freelance workers; denying them a work opportunity or blacklisting them; or otherwise discriminating against them.
How will the State FIFA be enforced?
There are two ways that the State FIFA is enforced.
First, as mentioned above, a freelance worker may file a claim with the AG. If the AG believes that a hiring party has engaged, or is about to engage, in any practices prohibited by the State FIFA, the AG may bring an action on behalf of the State against the hiring party. The AG may seek to enjoin (i.e., stop) the hiring party from engaging in said practices, and may seek restitution for the affected freelance worker(s) for any money or property that the hiring party obtained through said practices. The AG may also seek civil penalties against the hiring party as follows: up to $1,000 for the first violation; $2,000 for the second violation; and $3,000 for subsequent violations. However, hiring parties could face up to $25,000 in penalties for a "pattern and practice" of violations.
Second, the State FIFA provides a private right of action for freelance workers to file their claims in court. Freelance workers have up to two years to bring claims concerning violations of the State FIFA's written contract requirements, and up to six years to bring claims concerning violations of the State FIFA's timely compensation and anti-discrimination requirements. Depending on the nature and quantity of the violations, available remedies include: statutory damages of up to $250; statutory damages in the amount of the value of the contract; double damages; injunctive relief; reasonable attorneys' fees and costs; and/or any other remedies that "may be appropriate."
I contracted a worker and have a written contract with them for their services as required by the State FIFA. Does that mean they are automatically an independent contractor under New York State law?
No. The State FIFA specifically states that no provision of the law provides a determination about the legal classification of any worker as either an employee or an independent contractor. Given that worker classification is a highly active area of litigation, hiring parties should determine whether a worker is properly classified as an employee or an independent contractor before engaging their services.
If both the State FIFA and the City FIFA apply to a hiring party, which law should the hiring party follow?
Both. The State FIFA specifically states that it does not override or supplant any of the provisions of the City FIFA.
How does the State FIFA compare to the City FIFA?
Although the State FIFA and City FIFAs are very similar, they are not exactly the same. By way of example only, the State FIFA excludes construction contractors from the definition of "freelance worker," while the City FIFA does not, so hiring parties in New York City who engage construction contractors are required to afford them the protections of the City FIFA. Additionally, unlike the City FIFA, and as noted above, the State FIFA includes an additional provision requiring written contracts with freelance workers to specify the deadline by which said workers must submit their invoices to meet the hiring party's internal processing deadlines for timely payment. To the extent that hiring parties in New York City are not including said deadline in their written agreements with freelance workers, they must begin doing as of August 28, 2024. Thus, hiring parties in New York City should review both the State FIFA and the City FIFA to ensure that they are compliant with both laws.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.