Quick Hits
- New freelance worker protection law will require timely payment of contracted compensation.
- Many freelance arrangements will be required to be defined in written contracts.
- The New York labor commissioner will have the authority to investigate and remedy complaints of violations.
Governor Hochul signed the law, Senate Bill (B) 5026 / Assembly Bill (A) 6040, on November 22, 2023, five months after it was passed by the state legislature in June 2023. The signing comes after Governor Hochul had vetoed a prior version of the bill in December 2022, citing the cost of the legislation and the expansion of the New York State Department of Labor’s (NYSDOL) regulatory authority over private contracts between employers and nonemployees.
The statewide “Freelance Isn’t Free Act” is also another example of the state enacting requirements and protections already enacted in New York City, which enacted a similar freelancer protection law in 2016.
The law will be codified as a new Section 191-d of the New York Labor Law and will take effect on May 20, 2024. Here is a breakdown of some of the key requirements.
Freelancers Defined
The law applies to “freelance worker[s],” defined as individuals or organizations, even if comprised of only one individual, “whether or not incorporated or employing a trade name,” who are “hired or retained as an independent contractor by a hiring party to provide services in exchange” for compensation of at least $800, or $800 in aggregate over a period of 120 days.
The law excludes contracts with:
- sales representatives;
- attorneys, or “any person engaged in the practice of law”;
- licensed medical professionals; and
- construction contractors.
The law further defines a “[h]iring party” as “any person who retains a freelance worker to provide any service,” aside from federal, state, and municipal government offices.
Timely Payment of Contracted Compensation
The law will require hiring parties to pay freelancers the contracted compensation “on or before the date such compensation is due,” or “no later than thirty days after the completion” of the work if no date is specified in the contract.
Hiring parties will be expressly prohibited from conditioning the timely payment of compensation on the freelancer accepting to be compensated less than the amount agreed to in a contract once the freelancer has started performing the contracted services.
Written Contracts Required
Under the law, whenever a hiring party retains the services of a freelancer, the terms of their agreement must be “reduced to writing.” Hiring parties will be required to “furnish a copy of such written contract, either physically or electronically, to the freelance worker,” and each party must retain a copy of the written contract.
Such written contracts between hiring parties and freelancers will be required to, “at a minimum,” include:
- the “name and mailing address of both” parties;
- “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 compensation is due or “the mechanism by which such date will be determined;
- “the date by which a freelance worker must submit a list of services rendered under such contract”; and
- any terms the labor commissioner “may by rule require.”
Hiring parties will be required to keep the contract for a period of no less than six years and will be required to make the contract available to the commissioner upon request. The failure to do so will create a presumption that the terms of the contract presented by the freelancer “are the agreed upon terms.”
According to the law, the labor commissioner will provide “model contracts” on the NYSDOL’s website “for use by the general public at no cost.”
Retaliation Prohibited
Hiring parties will be prohibited from using threats or intimidation, denying work opportunities, discriminating against, or otherwise penalizing a freelance worker to deter the worker from exercising his or her rights under the law or “from obtaining any future work opportunity because the freelance worker has done so.”
Complaints and Remedies
Freelance workers or their “authorized representative[s]” will have the ability to file a complaint with the labor commissioner alleging violations of the law’s requirements seeking an “investigation of such complaint and statement setting the appropriate remedy.”
Under the law, the labor commissioner will have the authority to:
- investigate and equitably remedy disputes between freelance workers and hiring parties,
- take assignments of wage claims from freelance workers,
- file lawsuits to collect wages from hiring parties in assigned claims,
- bring together multiple wage claims against a single hiring party in a single action, and
- enter into reciprocal agreements with other states to enforce the law.
Further, the law provides that freelance workers or their “authorized representative[s]” may bring an action alleging violations of the law in “any court of competent jurisdiction for damages.” In addition to “statutory damages equal to the value of the underlying contract” and reasonable attorneys’ fees and costs, a prevailing party alleging a hiring party’s failure to timely pay contracted compensation may recover “double damages, injunctive relief, and other such remedies as may be appropriate.” Violations of the law’s anti-retaliation provision may entitle freelancers to recover “statutory damages equal to the value of the underlying contract for each violation.”
The state attorney general will be authorized to bring civil actions in court on behalf of the state to enforce violations of the law, “[w]here reasonable cause exists to believe that a hiring party is engaged in a pattern or practice of violations.”
Next Steps
Employers in New York that utilize freelancers may want to review their current usage of them and the agreements or contracts used. Employers may want to ensure that such agreements clearly define the terms of the arrangement with respect to compensation of freelancers. In addition, because the law specifies that it does not provide “a determination about the legal classification of any such worker as an employee or independent contractor,” employers may wish to review agreements to ensure that such agreements are written and administered in a manner that will support a determination that the freelancer is an independent contractor, if this is the intended legal relationship.
Employers may also wish to monitor the NYSDOL’s website for information related to this law. For example, the law calls for the labor commissioner to publish model contracts on the NYSDOL’s website, as New York City already does, but the law is unclear on the timing of that publication.
Ogletree Deakins’ New York office will continue to monitor developments and will provide updates on the New York and Wage and Hour blogs.
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