Understanding New York’s Potential New Independent Contractor Law

Sep 14, 2022 | Business Law, Legal Update

Understanding New York’s Potential New Independent Contractor Law

In June of 2022, the New York Legislature passed a law that would afford protections to freelance workers throughout New York State, bringing independent contractor rights closer to parity with New York employee rights. The pending law is known as the Freelance Isn’t Free Act (the “Act”). The Act would apply to contracts entered into with certain independent contractors on or after that effective date.  It must be signed by the Governor to take effect.

What is the “Freelance Isn’t Free Act”?

In 2016, New York City enacted its own Freelance Isn’t Free Act, a local law setting protections for certain freelance workers working for New York City companies and serving as a model for New York State’s potential Act. The local law established a legal definition for freelance labor in New York City. As the name suggests, it is primarily geared toward helping freelancers who have payment issues with clients.

How the “Freelance Isn’t Free” Act Would Impact New York Independent Contractor Rights

The new Freelance Isn’t Free Act would provide for certain structural changes to 1099 independent contractor rights and the relationship with a hiring party. For eligible freelancers, including those who live in other states but do business with a company based in New York, those changes would include:

  • The freelancer’s right to a written contract regarding the terms of engagement,
  • A right to timely and complete payment,
  • The right to protection from retaliation, 
  • Access to legal support under the act for enforcement of the freelancer’s rights, and
  • Payment of double damages to a freelancer found to be harmed under the Act.

It is important to note that not all freelancers are eligible for the Acts’s protections. Some freelancers, like attorneys, medical professionals, certain sales professionals, and construction contractors, are exempt from the Act. The Act also requires that the freelancer be performing at least $800 worth of work under the contract before the Act’s protections are available. 

Right to a Written Contract

If your business is entering into a contract valued at $800 or more with a freelancer, you will need to ensure that you have an agreement in writing. Now may be a good time to update your independent contractor agreements or to create them if you do not have a form of agreement. Even if the work contemplated calls for less than $800 of freelance time or labor, you may want to ensure you have documented it in a written contract as a best practice.

Right to Complete and Timely Payment

The “Freelance Isn’t Free Act” provides for penalties if a hiring party fails to pay a freelancer in a complete and timely manner. The Legislature modeled the damages and penalties structure based on the New York City local law. A New York State hiring party need only check the New York City damages matrix to see what to expect if it fails to pay a freelancer in a timely manner. A court can order a hiring party to pay twice the would-be contract amount and order injunctive relief.

Protection from Retaliation

The Act would impose penalties for companies that retaliate, harass, or threaten freelancers who exercise their rights under the Freelance Isn’t Free Act. If a freelancer thinks you have violated the Act, they can seek protection initially by filing a retaliation complaint with the Office of Labor Policy and Standards (OLPS).

Access to Legal Services

Freelancers also would have a right to legal support from New York State to pursue their collection efforts. If a hiring party fails to pay a freelancer, an investigator may be assigned to the freelancer to assist with navigating the court system. Dealing with an investigation and the nuisance of court proceedings could well be considerably more expensive for a hiring party than simply paying a freelancer on time. 

Double Damages

In cases where a freelancer is paid late, is not paid, or is underpaid, a court is authorized to award double the value of the entire contract. Businesses also risk fines and fees for failure to pay freelancers. 

Next Steps for New York State Businesses

We suggest having written agreements with freelancers, if for no other reason than to avoid misunderstandings.  If the proposed legislation is enacted, written agreements could prove to be even more valuable.  A good strategy is to create a working template for these agreements (in plain English) that can be easily and quickly filled in with the specific terms of each freelance engagement.