May 15, 2017

Freelance Isn’t Free Act

The first law of its kind in the U.S., the New York City Council unanimously approved the Freelance Isn’t Free Act, which takes effect on May 17, 2017.

What is the Freelance Isn’t Free Act?

Also known as Local Law 140 of 2016, the act enhances and establishes protections for independent contractors by creating and protecting their right to:

  • protection from retaliation
  • full and timely payments
  • a written contract

The written contract must specify the date the contractor will be paid or the contractor must be paid within 30 days of the completion of work. What’s more, the following must be included in any contract with a value of more than $800:

  • the parties’ names and mailing addresses
  • an itemization of services to be provided
  • the “value of services to be provided pursuant to the contract”
  • the rate and method of compensation
  • the date when the “hiring party” must pay the contracted compensation or the “mechanism by which such date will be determined”

Damages span from $250 for not having a written contract, to double damages of the value of the services for non-timely payment or non-payment of an independent contractor, to up to $25,000 for multiple of persistent violations. Other damages may also include attorney’s fees, injunctive relief, and statutory damages.

The Office of Labor Policy and Standards (OLPS) are responsible for reporting the law’s effectiveness, gathering data, creating court navigation, and receiving complaints.

Additional Provisions of the New Act

With the act signed into law, it’s important to understand the basics. The following helpful legal blog also recommends some additional provisions in the agreement, including:

  • No payment is due until the contractor has submitted a formal invoice for payment to a specified person or persons within the company, sent in a manner likely to get the attention of the recipient (such as by mail or overnight courier service).
  • Payment is due within a specified number of days within which invoices are typically paid by the company. If a business typically pays invoices within 45 days after presentation, it would be wise to include a clause that payment shall be sent by the company within 60 days after receipt of the invoice from the contractor.
  • A representation as to whether the independent contractor has any employees, helpers, or partners and, if operating under a trade name, whether the contractor is an individual or an enterprise with more than one employee or helper.
  • No interim or final payment(s) is (are) due if, in the good faith discretion of the business, the freelance worker has not fully or satisfactorily performed all of the contracted services.
  • Neither party has any obligation to continue the relationship after completion of the engagement or consider the other party in connection with future services.

The Freelance Isn’t Free Act, allows a contractor to sue for double damages if these criteria are not met, even if the hiring party is domiciled outside of NYC.

But no need to panic. The good news is that businesses that contract the right way cover much of what the law instructs already, so radical changes may not be the case for all. However, any client doing business in NYC, or utilizing the services of a contractor who lives in NYC, should consult with legal counsel to ensure they are operating within the confines of the new law.

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