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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