gig worker - Horton Management Law

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).

For more employment law updates, sign up for the Horton Management Law email newsletter and follow us on LinkedIn.

On November 22, 2023, New York Governor Kathy Hochul signed the “Freelance Isn’t Free Act.” She had previously vetoed the same legislation in 2022. The new law will affect most independent contractor relationships, at least requiring written contracts.

The New York Freelance Isn’t Free Act was originally scheduled to apply to contracts entered into on or after May 20, 2024. However, the law was amended on March 1, 2024, with a new effective date of August 28, 2024. Originally placed in the New York Labor Law, the Freelance Isn’t Free Act has been moved to Section 1415 of the General Business Law.

Note: New York City’s Freelance Isn’t Free Act took effect on May 15, 2017. This new state law will expand similar rights and restrictions statewide.

Freelance Workers

The law applies to a broad range of freelancers, such as writers, editors, graphic designers, consultants, and others in the gig economy.

“Freelance worker” is defined to mean:

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 to provide services in exchange for an amount equal to or greater than $800, either by itself or when aggregated with all contracts for services between the same hiring party and freelance worker during the immediately preceding 120 days.

However, the following categories are excluded from coverage:

Sales representatives, as defined in New York Labor Law Section 191-a
Lawyers legally practicing law
Licensed medical professionals
Construction contractors

Hiring Parties

The term “hiring party” is used under the Freelance Isn’t Free Act instead of “employer,” since the law targets independent contractors rather than employees.

“Hiring party” is defined broadly as “any person who retains a freelance worker to provide any service,” except for a government entity. Accordingly, the law does not apply to public employers.

It applies to “freelance workers,” defined as individuals or single-person organizations hired as independent contractors for services worth $800 or more. The law includes a broad range of freelancers, such as writers, editors, graphic designers, consultants, and others in the gig economy.

Freelancer Contract Requirements

The Freelance Isn’t Free Act mandates that contracts between freelance workers and hiring parties be in writing. The hiring party must provide a copy of the contract to the freelancer either physically or electronically.

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

The New York Commissioner of Labor must provide model contracts on the Department of Labor’s website.

A freelancer can assert a violation of the Act if the hiring party did not provide a written contract upon request made before the work began. If the freelancer did not request a contract upfront, the hiring party would still be at risk of evidentiary presumptions in the freelancer’s favor if there is no written contract.

Payment

Under the Act, payment must be made either by the date specified in the contract or, if not specified, within 30 days of completing the freelance worker’s services. The law prohibits hiring parties from demanding that freelancers accept less compensation than contracted as a condition of timely payment.

Protections Against Retaliation and Legal Recourse

Hiring parties that pay late, or don’t pay at all, can be penalized with double damages.

Freelancers are also protected from retaliation for exercising their rights under the Act. Hiring parties cannot deny work opportunities or future work as a form of retaliation. Each violation may result in statutory damages equal to the contract value.

Freelancers can bring civil actions for damages, including attorney’s fees and costs. They have up to 6 years to assert nonpayment or retaliation claims.

Administrative penalties of up to $25,000 may be imposed if a hiring party has been found to have engaged in a pattern or practice of violating the Freelance Isn’t Free Act.

In addition to private lawsuits, the NYS Attorney General may pursue legal claims against hiring parties. (The original legislation provided for the Department of Labor to have administrative jurisdiction over violations of the Freelance Isn’t Free Act. However, Governor Hochul objected that this would impose too much of a burden on the DOL’s resources.)

Implications for Employers and Freelancers

The Freelance Isn’t Free Act signals a shift toward more protections for independent contractors in New York, but also places significant new burdens on hiring parties. It emphasizes the importance of clear, written contracts and timely payment practices. However, the restrictive nature of the law could result in unintended consequences, such as companies opting to work with freelancers outside of New York where possible. If your organization uses independent contractors, you should review such arrangements before the new law takes effect.