For employers doing business in New York, the “Freelance Isn’t Free” Act (the “Act”) signed into law by Governor Kathy Hochul in March of this year may have stirred up memories of the New York City ordinance enacted just a few years ago by the same name.

Both laws establish protections for freelance workers that aim to ensure that they receive timely compensation for all services performed. The namesake state law, however, does not impose obligations identical to those required by the city-level ordinance. Moreover, some not well-publicized legislative shuffling has caused confusion about the Act and its applicability statewide.

Wait, Didn’t This Happen Already?

Earlier this year, we wrote about the Act, anticipating an effective date of May 20, 2024. However, two days after our publication, the New York State Senate took up a bill to amend the Act by removing its provisions from the New York Labor Law— which is enforced by the New York State Department of Labor (“NYSDOL”)—and codifying it instead as Article 44-A of the New York General Business Law—which is enforced by the state’s Attorney General. The governor signed this legislation on March 1, thereby bumping the Act’s effective date to August 28, 2024.

Below, are some of the key aspects of the Act that employers across New York State should keep in mind when hiring independent contractors as the August 28 effective date approaches. 

Who Counts as a “Freelance Worker”?

The Act defines a freelance worker as any person or any organization composed of no more than one person hired as an independent contractor to provide services valued at least $800. Whether the person hired performs the services in question under a corporate name or their own legal name is irrelevant. Workers engaged in certain professions—such as licensed medical professionals, attorneys, and construction contractors—are expressly excluded.

Importantly, the $800 threshold applies to all contracts for services between the hiring entity and the freelance worker during the preceding 120 days. In other words, an employer that has engaged a freelance worker to perform services on more than one occasion must make sure to aggregate the value of each contract to determine whether the Act’s requirements apply to them.

Written Contract Requirement

The Act requires anyone that engages a freelance worker to perform services for them to reduce the agreement to writing. That written agreement must, at minimum, contain:

• The name and mailing address of both parties;
• 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;
• The date on which the hiring party must pay the contracted compensation or the mechanism by which the payment date will be determined; and
• The date by which the freelance worker must submit a list of services rendered under the contract to the hiring party so that the hiring party can meet any of their internal processing deadlines for the purposes of compensation being timely rendered by the agreed-upon date.

The hiring party must also provide a copy of the written contract to the freelance worker, and both must retain a copy.

It should, however, be noted that the Act places the ultimate burden on the hiring party to keep a record of the contract. The Act requires the hiring party to retain a copy of the contract for at least six years. If the hiring party fails to do so and the freelance worker decides to file a complaint with the Attorney General, the hiring party’s failure to produce the contract will give rise to a presumption that the terms the freelance worker has presented are the agreed upon terms.

Note that, prior to its amendment by the legislation signed on March 1, the Act vested the NYSDOL with enforcement duties. Even as modified, the Act states that the NYSDOL will make model contracts available on its website but has yet to do so.

Timing of Payments to Freelance Workers

The Act requires an employer who has hired a freelance worker to pay them either: (1) whenever such compensation is due under the terms of the contract; or (2) no later than thirty days after the completion of the freelance worker’s services if the contract does not provide a specific date or specify the mechanism by which the payment date will be determined.

Enforcement Provisions

As noted above, a freelance worker may file a complaint with the Attorney General to allege a hiring party’s violation of the Act’s provisions or any rule or regulation promulgated under the Act. In addition, the Act provides a private right of action for damages, including statutory damages of $250, and imposes various statutes of limitations depending on the nature of the claim. The Act establishes:

• A two-year statute of limitations for claims alleging a hiring party’s failure to reduce to writing a contract with a freelance worker in accordance with the Act’s requirements.
• A six-year statute of limitations for claims alleging a hiring party’s failure to pay a freelance worker in accordance with the Act.
• A six-year statute of limitations for claims alleging that a hiring party has subjected a freelance worker to adverse action (e.g., discipline, intimidation, denial of a work opportunity), discriminated against a freelance worker, or otherwise taken an action that penalizes a freelance worker for or is reasonably likely to deter a freelance worker from exercising their rights under the Act.

In addition to empowering freelance workers to file individual lawsuits, the Attorney General has the authority to commence a civil action where reasonable cause exists to believe that a hiring party is engaged in a pattern or practice of violations under the Act. A guilty finding on such a claim could lead to a civil penalty of up to $25,000.

Joseph Ramesar, a Summer Associate in Epstein Becker Green’s New York City office (not admitted to practice) contributed to the preparation of this piece.