As you probably know, at the end of last year, Governor Hochul signed into law the Freelance Isn’t Free Act. The law went into effect on August 28, 2024.
When we first blogged about it, way back in 2023, the law was scheduled to go into effect in May 2024, but the Legislature amended it, moving it from the New York Labor Law to the New York General Business Law which resulted in an effective date of August 28, 2024. Interestingly, the content of the law didn’t change; only the law’s location in the books of statutes changed.
Odd, isn’t it?
Since the law’s now in effect, it’s important to ensure you’re in compliance when you hire independent contractors in New York State.
What’s the Freelance Isn’t Free Act?
The law, which amended Article 44-A of the General Business Law, creates new protections for freelance workers who are hired to work as independent contractors. Its purpose is to ensure that freelance workers receive timely compensation for any services they perform.
What’s a Freelance Worker?
According to the law, a freelance worker is any single person or a one-person shop where the person is hired as an independent contractor to perform services for someone else. To be a freelance worker entitled to the law’s protection, she must be paid at least $800 during any 120-day period – that’s four months in total – during which she’s working for someone else. So if she makes less than $800 in four months, she’s not protected by this law.
Who’s Excluded?
Licensed medical professionals, attorneys, construction contractors, and sales representatives are excluded from the definition of freelance worker.
What’s a Hiring Party?
Under the law, someone that hires a freelance worker is called a hiring party, and as logic might dictate, the hiring party is any person or company that retains a freelance worker to provide any service. But the law doesn’t include governments, so the United States, foreign governments, State agencies, and cities, villages, and towns in New York don’t have to comply with the Act.
What Does the Act Require You to Do?
Bottom line, gone are the days of hiring an independent contractor on a handshake or even a simple email. The law requires more.
A hiring party is required to meet certain standards related to contracts and timely payment.
Written Contracts
The law requires a hiring party to use a written contract to hire a freelancer. Minimally, the contract must include:
- The name and mailing address of both the hiring party and the freelancer;
- Itemization of all services to be provided, as well as the value of these services;
- The rate and method of compensation;
- The date of anticipated payment; and
- The date by which the freelancer must submit a list of the services she’s performed in order to ensure timely payment.
The hiring party must keep this contract for at least six years and must make the contract available to the NY Attorney General upon request. That’s pretty intrusive.
The State Department of Labor created a contract template if you choose to use it. But the law doesn’t require you to use the DOL’s template. If you want to use your own contract, that’s absolutely fine. Just ensure your contract has the required components.
Timely Payments
If you hire a freelancer, you’re required to pay the contracted-for price on or before the date on which you originally agree or within 30 days after the completion of services.
Once the freelancer begins work for you, you can’t require her to take less. The Legislature apparently felt that, sometimes, the larger company squeezes the independent contractor to take less money in exchange for getting paid on time. That can’t happen any more. In other words, the law locks you into the promise to pay.
Penalties for Noncompliance
Not only did the law’s amendment change its location in New York’s laws, it also changed who enforces the law. Now, it’s enforced by the State Attorney General’s Office which currently is overseen by Letitia James.
However, the penalties for violations remain the same. First and foremost, the hiring party can’t threaten, intimidate, harass, or discriminate against a freelancer or take any other action – such as hindering any potential future work opportunities – that penalizes her for exercising any right under the law.
If the hiring party doesn’t pay up by the contract payment deadline, the hiring party can be penalized with double damages. A freelancer can choose to file a lawsuit against the hiring party for alleged violations of this law or breaches of the written contract. This kind of lawsuit has a normal statute of limitations – six years from the alleged breach of contract, and what that means is the independent contractor has a pretty long time to file suit against you if she chooses.
Importantly, the law calls for the recovery of attorneys’ fees. This is not the norm in New York (usually each side pays its own legal expenses). So it creates added pressure to get it right, because paying for your own attorney as well as the claimant’s attorney – if she were to win – really can add up.
Last, if an investigation conducted by the Attorney General reveals that the hiring party violated the law multiple times, it can face up to $25,000 in penalties for the pattern of violations.
What Should You Do Now?
If you’re using independent contractors in your business – again, either a solo person or a small company with only one person involved – ensure you’ve got a contract. And it’s got to meet the criteria listed above.
As the hiring party, you also should ensure that you’re making timely payments to avoid any potential allegations that you’ve violated this law.
If you’re an independent contractor, this law is meant to protect you. Take a look through your current project list and consider whether you’d prefer to insist on following the terms of this new law. That might mean having a conversation with your clients or customers.
If you have questions about contract law or other aspects of running your business, The Coppola Firm is here to help. Reach out at 716.839.9700 or info@coppolalegal.com.
