Newly Mandated Protections for Independent Contractors Under New York State Law

Starting in May 2024, employers who engage freelancers in New York State will need to comply with recently enacted amendments to the State’s Labor Law.  Those amendments, embodied in the “Freelance Isn’t Free Act” (the “Act”; § 191-d of the Labor Law), impose new hiring requirements and offer additional protections for independent contractors.  The Act is modeled on similar but not identical legislation that went into effect in 2017 specifically as to New York City.  Below are key details concerning the Act.

Scope of the Act’s Coverage

The Act speaks in terms of “freelance workers,” which are defined as “any natural person or organization composed of no more than one natural person, whether or not incorporated or employing a trade name, that is hired or retained as an independent contractor by a hiring party.”  Thus, a covered freelance worker can be either an individual or a company consisting solely of one individual, such as a single-member LLC.  To fall within the Act’s protections, the independent contractor must be providing services in exchange for at least $800, either as part of a single contracted-for exchange or when aggregated with other service contracts between the same parties from the preceding 120 days.

The Act does not apply to the following workers:  sales representatives; practicing attorneys; licensed medical professionals; and construction contractors.  (In contrast, construction workers are not excluded under New York City’s version of freelancer legislation.)

Federal, state, local, and foreign governments are expressly excluded from the Act’s definition of “hiring party.”

Requirement of Written Contracts

Under the Act, a hiring party that engages the services of a freelance worker must reduce the parties’ service contract to writing.  A copy of that contract must be furnished to the freelancer, either physically or electronically.  Moreover, the hiring party must keep a copy of the contract for at least six years, and must make it available to New York’s Department of Labor upon request.

Pursuant to the Act, the written freelance contract must include the following:

• the names and mailing addresses of the hiring party and the freelance worker;
• an itemization of all services to be provided by the freelancer, the value of the services to be provided, and the rate and method of compensation;
• the date on which the hiring party must pay the contracted compensation (or the mechanism by which the date will be determined); and
• the date by which the freelancer must submit to the hiring party a list of services rendered under the contract to meet the hiring party’s internal processing deadlines to allow payment by the agreed-upon date.

Model contracts will be made available on the Department of Labor’s website.

Effective Date

The Act goes into effect statewide on May 20, 2024.  It will not apply retroactively, but only to those contracts entered into on or after the effective date.

Thirty-Day Payment Deadline, Unless Otherwise Specified

Unless the parties’ written contract specifies a different date, the Act requires that the hiring party pay the freelancer the contracted-for compensation no later than 30 days after completion of the freelancer’s services under the contract.

The Act also provides that once the freelancer has begun performing services under the contract, the hiring party may not require, as a condition of timely payment, that the freelancer accept compensation less than the contracted amount.

Anti-Retaliation Provision

Pursuant to the Act, a hiring party cannot “threaten, intimidate, discipline, harass, deny a work opportunity to, or discriminate against a freelance worker, or take any other action that penalizes a freelance worker for, or is reasonably likely to deter a freelance worker from, exercising or attempting to exercise any right guaranteed under [the Act], or from obtaining any future work opportunity because the freelance worker has done so.”

Private Right of Action and Remedies

The Act provides a private right of action allowing freelance workers alleging violations of the law to file an action for damages in any court of competent jurisdiction.  A six-year statute of limitations applies, except in cases alleging violations of the written-contract requirements, which have a two-year statute of limitations.

In addition, freelance workers may file a complaint alleging violations of the Act with the New York State Department of Labor.

Plaintiffs who prevail on a claim of non-payment may recover – in addition to the amounts owed under the contract with the hiring party – double damages, injunctive relief, reasonable attorneys’ fees, costs, and “such other remedies as may be appropriate.”

Plaintiffs prevailing on a claim of retaliation may recover – in addition to any other amounts owed under the law – “statutory damages equal to the value of the underlying contract for each violation [of the anti-retaliation provision].”

And where reasonable cause exists to believe that a hiring party has engaged in a pattern or practice of violations, the New York Attorney General may commence a civil action on behalf of the State and seek injunctive relief, civil penalties of up to $25,000, and “any other appropriate relief.”

Implications for Employers

Employers who engage freelance workers in New York should begin ensuring that their hiring, contract drafting, payment timing, and record-keeping practices will be compliant with the Act.

Employers should also keep in mind that nothing in the Act may be construed as providing any kind of determination about the legal classification of a worker as an employee or independent contractor.  Proper classification of a worker as an employee or an independent contract is subject to its own special set of rules and considerations.

This article is intended as a general discussion of these issues only and is not to be considered legal advice or relied upon. For more information, please contact RPJ Attorney Gregory Feit who counsels clients on employment law, litigation, arbitration, negotiation, and trial advocacy. Mr. Feit served is admitted to practice in New York.