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Dec 20 2016

New NYC Law Makes Written Contracts Mandatory for Freelancers

Every holiday season, many NY City companies employ freelancers to fill a variety of roles for when the business gets swamped. Well starting in 2017, those businesses will need to comply with a new law that goes into effect May 15 2017 in the five boroughs of New York City. The law, appropriately named “The Freelancers Aren’t Free Act” protects freelance workers by (1) requiring freelancer contracts to be in writing, (2) requiring timely payment, (3) prohibiting retaliation, and (4) providing specific remedies and damages available to aggrieved freelance workers. The law does not apply to sales representatives, attorneys or licensed medical professionals. Key Points:

A. Contracts with freelancers for services of $800 or more must be in writing. That total can be reached by including the amounts for contracts between the same parties in the immediately preceding 120 days. The contract must include the name and address of the hiring party and the freelance worker; an itemization of the services the freelancer will provide; a price schedule for those services; and the date for final payment to the freelancer. That will require companies to use their legal name in the contract to make it easier for freelancers to identify who or what entity is actually hiring them.

B. The hiring party must pay the freelancer on or before the date specified in the contract. If there is no date set in the contract, the law requires the hiring party pay the freelancer no later than 30 days after the completion of the freelancer’s work.

C. The hiring party may not threaten, harass, deny an opportunity to or take any action against a freelance worker that deters the freelancer from exercising any right under the Act.

So what happens if the hiring party violates one of these provisions? The law provides clear penalties:

nyc-labor-office1. A plaintiff who proves they requested but were denied a written contract before work began is entitled to statutory damages of $250.
2. If a hiring party violates the written contract requirement plus any other section of the statute, the statutory damages will be the full value of the underlying contract in addition to damages for the other sections violated.
3. Plaintiffs who are successful in claims under the payment provision are entitled to double damages; so a freelancer who is contractually entitled to $1,000 in unpaid fees is automatically entitled to $2,000 under this section.
4. Plaintiffs who are successful in claims under the retaliation provision of the act are entitled to damages in the value of the underlying contract for each instance of retaliation.
5. A successful plaintiff is entitled to attorney’s fees.

That last provision means that plaintiff employment lawyers will be looking for these cases as the value of the case will not be a deterrent to bringing a claim under the Act.

Like most labor regulations, waivers of these statutory rights are void as against public policy. That means employers cannot get freelancers to sign a general release saying they were properly paid. The Act states that the New York City Office of Labor Standards (NYCOLS) will collect data on the effectiveness of these new laws. It may be useful at the end of 2017 to file a Freedom of Information Law request for this data to see what industries were impacted and what were the average size of penalties and legal fees awarded.

One thing is clear: We continue to see a trend on placing additional requirements and burdens on employers – large and small – to ensure that workers aren’t taken advantage of. However, many small businesses that are not getting proper legal advice will be caught in the crossfire and could face significant financial penalties for breaking laws they did not even know existed.

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