With the Freelance Isn’t Free Act (FIFA) scheduled to go into effect May 15, New York City employers must now prepare contracts — under the threat of potentially stiff penalties for noncompliance — in order to utilize independent contractors, as many of them do for a broad range of services.
The New York City Council passed FIFA on October 28, 2016, to provide greater protections for freelancers by imposing specific requirements on hiring parties located in New York City. Under FIFA the term “hiring party” means any person who retains a freelance worker to provide any service, other than foreign, federal, state, and local municipalities.
The term “freelance worker” means any person or any organization composed of no more than one person that is hired or retained as an independent contractor by a hiring party to provide services in exchange for compensation. Commissioned sales representatives (as defined by Labor Law § 191-a), attorneys, and licensed medical professionals are excluded from the definition of freelance worker.
FIFA requires a contract to exist between a hiring party and a freelance worker where the value of services is $800 or more, either by itself or when aggregated with all contracts, between the same hiring party and freelance worker during the immediately preceding 120 days. The contract must be reduced to writing and each party is required to keep a copy.
The written contract must include the following information:
The date on which the hiring party must pay the contracted compensation or the mechanism by which such date will be determined.
FIFA allows independent contractors to file private causes of action. Failing to enter a qualifying contract automatically entitles an independent contractor to a $250 award. Additionally, a hiring party failing to both enter a written contract and timely pay amounts owed may result in treble damages: an award of the contract price for failing to enter the required contract and an award of double damages equal to the amounts owed. Furthermore, if a hiring party refuses to deal with an independent contractor who insists on a written contract, the contractor may file a retaliation claim, entitling the contractor to an award equal to the amount of services at issue. Lastly, a prevailing independent contractor may recover reasonable attorney’s fees.
Frequent violators of FIFA risk even more severe penalties. The New York City Corporation Counsel is permitted to bring a civil action on behalf of the City alleging pattern or practice violations, with a potential penalty of up to $25,000.
Consequently, hiring parties that routinely contract with freelancers would be well advised to consult with an employment attorney to understand this new law and ensure compliance.