Wage and hour laws have traditionally drawn, or at least attempted to draw, a bright line between employees, who are entitled to the protections of wage and hour and other employment laws and independent contractors, who are not covered by most employment-related statutes. In the growing gig economy, however, some have suggested that there should be a third category of worker – one that has some, but not all, legal protections of an employee but whose relationship is freelance, transient and potentially for multiple entities. In the first-of-its-kind legislation, the New York City Council has passed a bill that provides statutory wage protections for freelance workers. The law awaits signature from New York City Mayor Bill de Blasio. If signed, the law would become effective 180 days after it is signed and would apply to contracts signed after the effective date.
For purposes of the law, called the Freelance Isn’t Free Act, the term “freelance worker” means any natural person or any 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 compensation. A freelance worker would be entitled to a written contract in any circumstance when the contract has a value of $800 or more, “either by itself or when aggregated with all contracts for services between the same company and freelancer worker during the immediately preceding 120 days.” The written contract would need to include:
- the name and mailing address of both the hiring party and the freelance worker;
- an itemization of all services to be provided by the freelance worker, the value of the services to be provided pursuant to the contract and the rate and method of compensation; and
- the date on which the hiring party must pay the contracted compensation or the mechanism by which such date will be determined.
The law provides that compensation must be paid to the freelance worker either on or before the date specified in the contract, or, if the contract does not specify, no later than 30 days after the completion of the freelance worker’s services under the contract. The law also prohibits a company from requiring a freelance worker to accept less compensation than the amount of the contracted compensation as a condition of timely payment.
The Freelance Isn’t Free Act sets forth a private right of action and also permits complaints to be filed with the New York City Office of Labor Standards. If signed as drafted, a freelance worker who successfully asserts a claim under the law would be entitled to damages, including any payments owed for the services provided, and attorney’s fees and costs. Damages vary based on the claims asserted. For example, there is a $250 statutory penalty for failing to provide a contract required by the law. For successfully pursuing a claim for the failure to follow the law’s payment obligations (i.e. failing to timely or fully pay a freelance worker), a plaintiff would be entitled to double damages, injunctive relief, and “such other remedies as may be appropriate.” Freelance workers would be protected from retaliation for exercising or attempting to exercise any of the protections afforded in the law.
The law also includes a provision empowering the New York City Corporation Counsel to file a civil action on behalf of the City if there is reasonable belief that a company is engaged in a pattern or practice of violating the law. In addition to the other potential damages cited above, there is an additional potential civil penalty of up to $25,000 upon a finding of a pattern or practice of violation of the law.
Mayor de Blasio has indicated that he is supportive of the legislation, and, if he signs the law, independent contractors would be entitled to statutory wage protections for the first time in the United States. Whether this type of protective legislation will gain momentum and whether this third-category of worker will crystalize under the law remains to be seen. In the meantime, New York City employers should be prepared to change their freelance contracting and payment procedures to comply with the law’s new requirements should it be enacted.