Tag: worker classification

Model Freelancer Contract

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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Classifying People in Your Workplace Webinar

Classifying the People in Your Workforce (Webinar Recap)

On September 24, 2019, Julie Bastian and I presented a complimentary webinar called “Classifying the People in Your Workforce”. For those who couldn’t attend the live webinar, We’re happy to make it available for you to watch at your convenience.

In the webinar, we discuss:

  • Employees vs. Independent Contractors
  • Interns and Volunteers
  • Legal Standards
  • Challenges of Getting it Right
  • Ramifications of Getting it Wrong
  • Documenting the IC Relationship

By default, most workers are employees. Sometimes the circumstances warrant a different arrangement. But there are potentially costly pitfalls of making an improper independent contractor classification.

Don’t have time to watch the whole webinar right now? Click here to download the slides from the webinar.

Why You Should Watch “Classifying the People in Your Workforce”

Many organizations rely on work by non-employees. Or, at least, people that they don’t classify as employees. These other workers can include independent contractors, unpaid interns, and volunteers. And they often include people who legally speaking actually do qualify as employees!

Improper independent contractor classifications can put an employer in violation of numerous legal obligations. These include tax reporting, insurance premiums, overtime requirements, and many more.

State and federal government agencies have obvious financial incentive to police improper worker classifications. Even a single complaint or dispute can bring your entire organization under scrutiny. This webinar will better inform you of factors to consider before considering someone to be an independent contractor. We also discuss how to document a valid IC arrangement.

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