The Freelance Isn’t Free Act (the “Act”) was enacted by the New York City Council and signed by the mayor. It went into effect on May 15, 2017. The law expands protections for freelancers who do not get paid in full on invoices.
Who is covered by the Act?
“Freelance workers” are defined as any person or organization (e.g., corporation or LLC) composed of no more than one person that is hired as an independent contractor in exchange for compensation. Excluded from this definition are sales representatives, lawyers and medical professionals.
A “hiring party” is anyone that retains a freelance worker to provide services. Excluded from this definition is the federal, state and city government.
What does the Act require?
Where a contract between a hiring party and freelancer worker has (or aggregate contracts have) a value of $800 or more, the Act requires that the contract be in writing. What constitutes a written contract is not specified by the Act, but common law contract principles could dictate that, for example, a series of emails constitutes a written contract. The contract, at a minimum, must specify:
What happens if there is no written contract?
If the freelance worker can prove that s/he requested a written contract before the work began, and did not receive one, the freelance worker is entitled to an award of $250 in statutory damages and attorneys’ fees and reasonable costs. The freelance worker has 2 years to bring this claim.
What happens if there is no written contract and the freelance worker is not paid in full?
If the freelance worker can prove that (1) s/he requested a written contract before the work began, and did not receive one, and (2) the hiring party failed to pay the freelance worker on or before the date compensation was due, or failed to pay in full after the work had been commenced, the freelance worker is entitled to statutory damages equal to the value of the underlying contract, double damages for unpaid amounts and attorneys’ fees and reasonable costs. Thus, in that instance, the monetary award could be up to three times the amount of the underlying contract.
Note, if there is no written contract, the date payment is due is 30 days after completion of the work under the contract.
The freelance worker has 2 years to bring the claim that there was no written contract and 6 years to bring the claim of nonpayment.
What happens if there is a written contract but the freelance worker is not paid in full?
If the hiring party and freelance worker had a written contract, but the hiring party has not paid in full under that contract, the freelance worker is entitled to double damages for unpaid amounts and attorneys’ fees and reasonable costs.
What if the freelance worker did not deliver on time or otherwise failed to deliver as promised?
The hiring party should be able to raise defenses to nonpayment. This is where a clear statement of expectations in the written contract is important for both freelance worker and hiring party.
Where does the freelance worker bring the claim?
The freelance worker may file a complaint with the director of the office of labor standards; the director will then notify the hiring party of the complaint within 20 days. The hiring party then has 20 days from receiving the complaint to respond by explaining that payment was made in full or why payment had not been made in full. The director than has 20 days to forward the hiring party’s response to the freelance worker. If the hiring party does not respond to the complaint it creates a rebuttable presumption in any court action that hiring party is in violation of the law. (A rebuttable presumption means that the court will presume that the hiring party violated the law and the hiring party will have the burden of proving otherwise).
After the complaint process at the office of labor standards, the freelance worker may bring an action in civil court. Note that, if the freelance worker has already brought a breach of contract action in court, it will not be able to file a claim with the director of the office of labor standards.
What is the benefit of first filing a claim with the NYC Office of Labor Standards?
The time frame for fact gathering is expedited and could facilitate a more efficient resolution of the nonpayment claim.
What does the law mean for freelance workers?
The law means that freelance workers should always request written contracts from hiring parties, and a record that they have done so. (E.g., email requesting written contract pursuant to the Act). Freelance workers should store those contracts in a safe place in case the hiring party does not pay. It also means that freelancers should keep good records of the quality of the work and its completion, in case the hiring party raises a defense that the work was not completed as promised.
What does the law mean for hiring parties?
First, hiring parties should always have written contracts with freelance workers that contain, at the very least, the required terms under the Act. They should store these contracts in a safe place in case the freelance worker claims that s/he never received a written contract. Second, they should expect that contracts for amounts over $800 will now be enforced because attorneys’ fees are provided by the Act. Third, hiring parties who will claim that the work was not completed as promised will want to keep good records of that fact, to raise it as a defense to nonpayment.
I’m a freelance worker but I don’t have money to hire a lawyer or the amount I am owed is less than what an attorney would cost…
The Act provides for attorneys’ fees, so you are likely to be able to find a lawyer to represent you if you have a solid case.
I’m a hiring party, can I use the written contract to have the freelance worker waive claims or remedies under the Act?
No. Such a waiver would not be enforceable under the Act.
The Act is a floor – in other words, the Act provides the bare minimum terms that the parties should include in their written freelance contract. It is contemplated by the Act that the director of the office of labor standards will provide model contracts on its website. In the meantime, see Meredith’s article, Getting Paid in the Naked Economy, for suggested contract terms.
In the coming months, Miller Law will be monitoring the Act and its implementation.