Category: Workforce Trends

August 29, 2024

NYS Model Freelancer Contract

New York State’s Freelance Isn’t Free Act took (FIFA) effect on August 28, 2024. As required by the Act, the New York State Department of Labor has developed a model freelancer contract. Although the model agreement meets the legal requirements, it has serious limitations. Accordingly, most hiring parties should consider modifying the model contract or drafting their own FIFA-compliant agreement.

Freelance Isn’t Free Act Overview

New York’s FIFA addresses non-employment relationships between a “hiring party” and a “freelance worker.” Under this law, only individuals and single-person organizations can qualify as a “freelance worker.”

When a hiring party engages a freelance worker, there must be a written contract between them.

By law, the contract must contain the following information:

Name and mailing address of both the hiring party and the freelance worker
Itemization of all services to be provided by the freelance worker
Value of the services to be provided
Rate and method of compensation
Date or mechanism of determining when payment will be made
Date by which a freelance worker must submit a list of services rendered to allow the hiring party to process timely payment

Hiring parties that don’t ensure there is a compliant contract in place risk various penalties. But the biggest risks aren’t just not having a written contract.

Purpose of the Freelance Isn’t Free Act

More than insisting on a written contract, FIFA is designed to give non-employees compensation protections similar to those of employees. Instead of typical breach of contract damages, FIFA allows freelancers to recover enhanced penalties as are available for unpaid wage claims. Consequently, hiring parties face significant liability risk when they don’t pay a freelancer in full and on time.

Click here for more on the FIFA requirements.

Components of the Model Freelancer Contract

The DOL’s model freelancer contract contains 25 numbered sections. These include identification of the parties, compensation terms, and various provisions referring to the freelance worker’s rights under FIFA. It appears the latter content goes beyond what the law actually requires.

Such additional provisions include those with the following headers:

Prohibition Against Waiver
Prohibition Against Retaliation and Discrimination
Violations

The template also includes the following provisions that may not be desirable (at least as written) in all contexts:

Intellectual Property Rights
Revisions
Termination
Indemnification
Insurance Required
Other Business Activity
Late Payment
Limitations on Liability
Confidential Information

The NYS DOL template “Freelance Worker Agreement” is available here.

Model Freelancer Contract Doesn’t Avoid Employment Relationship

By using the model freelancer contract as written, hiring parties would not only be telling freelancers how to pursue claims against them, but may also unwittingly jeopardize the independent contractor nature of the relationship.

The model contract states that “Nothing in this Agreement shall indicate the Freelance Worker is a partner, agent, or employee of the Hiring Party.” But it doesn’t specifically acknowledge that the freelancer is not an employee! Plus, the check-box, fill-in-the-blank format of other sections could result in terms that may support an employment classification.

Remember, a hiring party and worker can’t simply decide whether they have an employment relationship or not. That is always a question that could be determined by a court or government agency for various purposes after the fact. And the laws often operate on the assumption of an employment relationship (with the attendant legal consequences). Typically, the burden is on the hiring party to demonstrate that no employment exists, regardless of what the worker intended when entering into the arrangement.

Other aspects of the template agreement could also unwittingly support an employment arrangement. For example, providing an hourly pay rate and certain insurance coverages may be more typical for employees.

Better Approaches to FIFA Compliance

Ultimately, using the DOL’s model freelancer contract is probably better than not satisfying the obligation to put the terms of a freelance engagement in writing. However, hiring parties should strongly consider preparing their own agreements (with appropriate legal advice). It’s probably fair to say the DOL’s template is designed to favor freelancers. Even if not, the one-size-fits-all approach is likely to lead to problems down the road for some hiring parties.

Remember, the Freelance Isn’t Free Act and other related employment/independent contractor provisions are intended to protect workers. Any ambiguity will be resolved to their benefit. Thus, it’s critical to be intentional and cautious in drafting your independent contractor agreements (whether subject to FIFA or not).

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August 20, 2024

FTC’s Non-Compete Ban Blocked Nationwide

On August 20, 2024, the U.S. District Court for the Northern District of Texas enjoined the Federal Trade Commission’s (FTC) proposed non-compete ban. The decision, issued by U.S. District Court Judge Ada E. Brown, sets aside the FTC’s Non-Compete Rule. So, the FTC cannot attempt to enforce the rule when it is scheduled to take effect on September 4, 2024.

The case is captioned as Ryan LLC (Plaintiff) and Chamber of Commerce of the United States of America, Business Roundtable, Texas Association of Business, and Longview Chamber of Commerce (Plaintiff-Intervenors) v. Federal Trade Commission, Civil Action No. 3:24-CV-00986-E.

Basis for Injunction

Judge Brown found two legal deficiencies in the promulgation of the FTC’s non-compete rule.

Exceeding Statutory Authority

The court found that the FTC exceeded its statutory authority under the Federal Trade Commission Act (FTC Act). The ruling emphasized that the FTC does not have the power to issue substantive rules that broadly prohibit non-compete agreements across all industries and employment levels. The FTC’s authority to prevent unfair methods of competition does not extend to the creation of sweeping, substantive regulations such as this Non-Compete Rule.

Arbitrary and Capricious Action

The court also determined that the FTC’s rule was arbitrary and capricious. The ruling criticized the FTC for imposing a one-size-fits-all ban on non-compete agreements without adequately considering less restrictive alternatives or providing a rational basis for the rule. Plus, the FTC’s reliance on certain studies was insufficient to justify such a broad prohibition. The judge noted that no state had enacted a rule as far-reaching as the FTC’s proposed regulation.

According to Judge Brown, “In sum, the Rule is based on inconsistent and flawed empirical evidence, fails to consider the positive benefits of non-compete agreements, and disregards the substantial body of evidence supporting these agreements.”

Status Quo Preserved

With the proposed non-compete ban blocked, employers may continue using non-competes to the extent allowed under applicable state law. Note that some states, such as California, already largely prohibit the enforcement of non-compete clauses.

While this ruling halts the FTC’s current efforts, it does not entirely close the door on federal regulation of non-competes. The FTC may attempt to appeal the decision (though the relevant appellate courts are not expected to reach a different conclusion). Alternatively, the FTC may revise its approach with a more limited non-compete ban. Some individual state legislatures will probably revisit potential non-compete bans as well.

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May 31, 2024

New York Youth Workers Bill of Rights

On May 29, 2024, New York Governor Kathy Hochul unveiled her anticipated Youth Workers Bill of Rights. Announced during her 2024 State of the State address, this initiative seeks to better inform young workers about their rights and protections in their workplaces. This initiative does not impose affirmative new obligations on employers. But that does not mean it won’t have serious consequences.

The Youth Workers Bill of Rights is available for download here.

Essential Protections for Young Workers

The Youth Workers Bill of Rights doesn’t create new legal protections. Instead, it’s an informational resource that outlines several key protections for young employees, including:

Minimum Wage Assurance: Ensuring that young workers are paid at least the state-mandated minimum wage.
Anti-Discrimination Measures: Creating a workplace free from discrimination and harassment.
Safe Working Conditions: Maintaining a safe and healthy work environment.
Protection Against Retaliation: Allowing young workers to file complaints without fear of reprisal.

Employers may already have existing notice requirements regarding these topics, such as through minimum wage and employment discrimination rights posters. But this new document will likely increase the chance that minors and their parents are aware of the legal parameters of the workplace.

Access and Distribution

The Youth Workers Bill of Rights will be provided with working papers that minors typically obtain through their schools. In addition to increasing the likelihood that employees know their rights, this initiative may also lead the Department of Labor to raise its expectations regarding employer compliance. Again, nothing has changed in the law. However, the DOL may exercise its enforcement discretion differently following efforts to increase knowledge and awareness of the legal requirements.

The Youth Worker Information Hub

The New York State Department of Labor has also introduced a Youth Worker Information Hub. A comprehensive educational resource, this hub provides detailed information on topics such as:

Permissible Working Hours: Guidelines on the allowed working hours for minors.
Minimum Wage Compliance: Ensuring adherence to wage laws.
Restricted Occupations: Identifying jobs that are prohibited for those under 18.

According to the State, this resource is part of a larger administrative effort to address rising child labor violations and ensure young workers are treated fairly and lawfully.

Building on Previous Efforts

These developments build on Governor Hochul’s 2023 measures to tackle child labor issues, including the creation of an interagency Child Labor Task Force and the Protect Youth Workers Pledge for businesses.

What To Do for Your Business

The Youth Workers Bill of Rights was strategically launched with summer approaching. With schools out, an influx of young people enter the workforce–many for the first time. Review of the Youth Workers Bill of Rights provides a good start for employers looking to avoid child labor violations–many of which are incredibly nuanced and non-obvious.

Here are some steps you may want to take in response to these new NYS initiatives:

Educate Yourself: Ensure you and your team are familiar with the key protections and guidelines outlined in the Youth Workers Bill of Rights.
Inform Your Employees: Distribute the Youth Workers Bill of Rights to your staff, particularly those involved in hiring and managing young workers.
Utilize Available Resources: Make use of the Youth Worker Information Hub for guidance on compliance and best practices.
Update Workplace Policies: Review and update your workplace policies to ensure they align with the applicable standards and avoid potential violations.

By taking these proactive steps, businesses can help protect young employees and themselves, while cultivating a positive, supportive work environment.

For more information and resources, visit the NYS Youth Worker Information Hub.

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