On 22nd November 2023, New York Governor Kathy Hochul signed a new law called the ‘Freelance Isn’t Free’ Act (FIFA). This Law is designed to give better protection and support to people who work as freelance workers and independent contractors. It ensures that freelance workers have clear rights, including terms of payment and sets up a formal process to ensure freelance workers can enforce their rights.

New York State extended the protection that was first introduced in New York City with a similar local law named NYC’s Freelance Isn’t Free Act passed in October 2016. Now, all freelance workers across the state will benefit from these protections, not just those in the city.

‘Freelance Isn’t Free’ Act has come into force w.e.f. 28th Aug, 2024 and added as Article 44-A to the General Business Law (https://www.nysenate.gov/legislation/laws/GBS/A44-A).

Scope of the law

This Act has two main parties: Freelance workers and Hiring Party.

Freelance Worker:

According to the Act, Freelance worker refers to: –

1. Individuals or single person organization,
2. Hired as an independent contractor by a hiring party,
3. Provides services in exchange for:
   • At least $800 from a single contract, or
   • $800 or more when aggregated from all contracts from the same hiring party within the previous 120 days.

Exclusions: The following professionals are not considered as freelance workers: –

1. Sales Representative (A person or entity in New York State who solicits orders but is an independent contractor and not classified as a “commission salesman” or a salesperson placing orders for their own account for resale)
2. Lawyer
3. Medical Practitioner
4. Construction Contractor (Any person, sole proprietor, partnership, firm, corporation, limited liability company, association or other legal entity who by oneself or through others offers to undertake, or holds oneself out as being able to undertake, or does undertake a construction project)

Hiring Party:

Any individual or entity that engages a freelance worker to provide services.

Exclusions: The following are not considered as hiring party: –

1. US Government
2. State of New York
3. Any Municipality in New York State
4. Foreign Government

Therefore, it can be said “this Act applies to any person, whether a natural or legal entity, which hires a freelance worker to provide services, except the US Government, Municipality and Foreign Government”.

Requirement under the Law

1. Terms of Payment: This Act puts the mandatory payment requirement for freelance work. Hiring Parties are required to either pay the freelance workers on the date which is agreed as per the contractual terms or if the contract is silent about the payment terms, then the payment for freelance work should be paid not later than the 30 days after completion of the freelance work. Additionally, hiring parties cannot change the terms of payment after the commencement of services of freelance workers.
2. Written Contract: As per this act there should be a written contract and a copy of the same should be provided to the freelancer.
3. Record of Contract: Hiring party to maintain a record of contract for at least 6 years.
4. Prohibition on discrimination: This Act prohibits any hiring party from threatening, intimidating, disciplining, harassing, denying a work opportunity to, or discriminating against a freelance worker, it also prohibits hiring parties to retaliate against the freelance worker for exercising their rights provided under this Act.

Model Contract for Freelance Worker

Following clauses shall be include at minimum in the Freelance worker agreement (As per this Law and the Model Contract developed by the Department of Labor:

1. Name Clause: This section identifies the freelance worker and the hiring party, including their contact details. It shows who is involved in the agreement and their respective roles.
2. Service Clause: Details the specific services to be provided by the freelance worker.
3. Compensation Clause:

• Amount: Specifies how much the hiring party will pay for services (hourly, monthly, or project-based).
• Method: Outlines how payments will be made (e.g., cash, check, instalments)
• Date of Payment

4. Term Clause:

• Start and End Dates: Defines when services will start and conclude.
• List of Services Due: Requires the freelance worker to give a list of completed services by a specified date for timely payment processing.

For more detail, kindly refer to the Model Freelance Worker Agreement developed by the Department of Labor of the New York State.

(https://dol.ny.gov/system/files/documents/2024/08/freelance-worker-agreement.pdf) 

Enforcement of the Law

The state has incorporated following measures to ensure enforcement of the Law:

1. Role of Attorney General: This act has given power to the Attorney General to investigate any complaints about the violations of this Act or if they have a reason to believe that the hiring party is involved in violation of this Act they can take action on behalf of the people of New York. Attorney General can seek the following penalties against the hiring party:

• Up to $1,000 for the first violation
• Up to $2,000 for a second violation
• Up to $3,000 for a third or any subsequent violation

2. Action by Freelance Workers: This act provides the right of filing a complaint to the attorney general or suit in the competent court to the freelance workers who believe their rights are violated under this law.

Freelance workers believing their right has been violated under this Law can file complaint to the attorney general through following link:

(https://ag.ny.gov/resources/individuals/workers-rights)

3. Penalty for pattern or practice of violations: If court finds that the hiring party is involved in the pattern or practice of violation, the court may impose a civil penalty of up to $25,000.

Conclusion

‘Freelance Isn’t Free’ Act is a big step forward for freelance workers. This law acknowledges the key role that independent contractors and freelance workers play in the economy while ensuring they receive fair treatment and compensation for their work.

Disclaimer:  This is an effort by Lexcomply.com, to contribute towards improving compliance management regime. User is advised not to construe this service as legal opinion and is advisable to take a view of subject experts.