On November 22, 2023, New York Governor Kathy Hochul signed the Freelance Isn’t Free Act (the “State Act”), Senate Bill S5026.

This new law (codified as a new Section 191-d of the New York Labor Law) will require written contracts between freelance workers and hiring parties and creates broad protections for freelancers statewide, specifying when compensation must be paid in the absence of a contractual provision defining a payment schedule and imposing new obligations for those who retain freelance workers.

The State Act may sound familiar for two reasons. First, some may recall that in December 2022, Governor Hochul vetoed a similar bill, citing budget and funding concerns. Second, as discussed more fully below, the State Act builds upon New York City’s law of the same name (previously reported on here) (the “City Act”) by establishing various protections for independent workers across the state. Now that the State Act has been signed, it will take effect on May 20, 2024. Notably, the State Act applies only to contracts entered into on or after May 20, 2024.

Comparing the New York State and New York City Freelance Isn’t Free Acts

New York City employers may already be familiar with at least some of the provisions that will take effect under the State Act, as the City Act went into effect in May 2017. The City Act imposed the requirement that any engagement for which an independent worker agrees to provide services valued at $800 or more to a hiring party must be memorialized in a written contract that includes specific details. The City Act also provided various protections for freelance workers. Notably, the State Act specifically says that it may not be interpreted to override or supplant any portion of the City Act.

Who Is Covered?

Like its city counterpart, the State Act imposes a written contractual requirement whenever a freelance worker is hired to provide services of at least $800. Under both laws, a covered “freelance worker” is defined as an individual hired or retained as an independent contractor to provide services for compensation of at least $800. A “freelance worker” is any person working alone, or any organization composed of no more than one person, even if that individual operates through a corporation or uses a trade name. To the contrary, “freelance worker” does not include a “sales representative” (as defined in New York Labor Law Section 191-a), an attorney, a licensed medical professional, or, under the State Act, a construction contractor. If a freelance worker is retained by the same hiring party for multiple, smaller jobs, the $800 threshold is satisfied when all contracts for services between the hiring party and the freelance worker during the preceding 120 days amount to a sum total of $800.

Required Contract Terms

The State Act’s requirements for written contracts are likewise similar to the City Act’s. Under both laws, contracts between hiring parties and freelance workers must include, at minimum, the following:

• the name and mailing address of both the hiring party and the freelance worker,
• an itemized list of all services that will be provided by the freelance worker and the value of those services,
• the rate and method of compensation, and
• the date by which payment is due or the mechanism by which such date will be determined.

The State Act does contrast with the City Act, however, by including an additional provision that requires a written contract to specify any deadlines by which a freelance worker must submit an invoice or list of services rendered in order to meet the hiring party’s internal processing deadlines for timely payment of compensation owed. Notably, the State Act also empowers the state’s Commissioner of Labor (“Commissioner”) to impose additional requirements for mandatory written contracts through rulemaking.

Further Parallels Between the State and City Laws

Other State Act provisions that resemble those of the City’s ordinance include:

• requiring that, if the contract does not expressly provide a date of payment for the contracted services or the mechanism by which such date will be determined, then the freelance worker must be compensated within 30 days of the completion of services;
• preventing a hiring party from demanding that a freelance worker accept less compensation than contractually agreed to as a condition for timely payment; and
• prohibiting retaliation (namely, hiring parties must refrain from threatening, intimidating, disciplining, harassing, denying a work opportunity to, or discriminating against a freelance worker who exercises rights under either act).

Key Differences Under the State Act

Recordkeeping Obligations

Under the State Act, hiring parties must furnish a physical or electronic copy of the written contract to the freelance worker, which both parties are required to keep. Hiring parties must retain a copy of any contract with a freelance worker for a minimum of six years and, upon request, must provide a copy to the Commissioner. A hiring party’s failure to provide the Commissioner with a requested written contract will lead to the presumption that any terms presented by the freelance worker are the agreed-upon terms. If a hiring party fails to keep adequate records or provide the required written contract on demand, it will face penalties and bear the burden of proving that the freelance worker was paid timely.

Enforcement Provisions

Freelance workers or their authorized representatives alleging violations of the State Act may file a complaint with the Commissioner. Notably, the statute expressly provides that it vests the Commissioner with discretion and does not oblige the investigation of every complaint or the adjustment of controversies “in every instance.”

An aggrieved freelance worker may also file a civil action, but the statutes of limitation for such actions vary depending on the nature of the claim. Claims based on a hiring party’s failure to execute a contract or include all required terms must be brought within two years of the alleged violation; however, a plaintiff has six years to pursue actions on claims alleging unlawful payment practices.

The State Act sets forth in detail numerous types of potentially significant remedies that freelance workers can pursue, whether by a stand-alone action or in combination with other claims under New York wage and hour law. Specific damages are described as follows:

• A freelance worker who prevails on a claim that the hiring party failed to reduce an agreement to writing, or a claim alleging failure to include all the required terms in a contract, will be awarded statutory damages of $250.
• A freelance worker who prevails on a claim based on unlawful payment practices, such as failing to pay, paying late, or requiring the freelance worker to accept less compensation as a condition of timely payment, may be entitled to double damages (twice the unpaid or underpaid wages), injunctive relief, plus reasonable attorneys’ fees and costs, and other remedies “as may be appropriate.”
• A freelance worker who prevails on a retaliation claim may be entitled to statutory damages equal to the value of the underlying contract, for each violation.
• A freelance worker can also potentially pursue other claims under Article 6 of the New York Labor Law, for example, by alleging that they are an employee of the hiring party that misclassified them as an independent contractor. Successful claims pursuant to Article 6 can include unpaid or underpaid wages (including untimely wage payments and overtime payments), as well as liquidated damages equal to the unpaid or underpaid wages, plus reasonable attorneys’ fees. Moreover, if a plaintiff succeeds upon multiple Article 6 claims that include any violation of the State Act, the statute provides for additional statutory damages equal to the value of the underlying contract.

Further, the State Act expressly authorizes the Attorney General to bring a civil action against a hiring party that is believed to routinely violate this law.

What New York Employers Should Do Now

In anticipation of the May 20, 2024, effective date of the State Act, employers should do the following:

• Review the model contracts that the Commissioner will publish, along with any rules or guidance (when issued), and compare them against any existing contracts to ensure that the existing contracts comport with statutory requirements.
• Prepare written contracts with any freelance workers providing goods or services valued at $800 or more (whether in a singular contract or in the aggregate for the 120-day period immediately preceding the contract), and make certain that such agreements contain the terms required under the State Act.
• Train managers and supervisors regarding the State Act’s requirements (including timely payments) and prohibitions.
• Ensure that contracts with freelance workers are maintained for a minimum of six years so no presumption of alternate terms arises.

Elizabeth A. Ledkovsky and Jessica Hajdukiewicz contributed to this article.