The Freelance Isn't Free Act

A plain language explanation for freelancers and businesses in New York City

Effective May 15, 2017: NYC freelancers & businesses must comply with the Freelance Isn't Free Act


The Freelance Isn’t Free Act provides basic protections for freelance work, including:


Mandatory contracts.

Freelance agreements for over $800 of work during a 4-month period must have a contract outlining the scope of work, rate, method of payment, and the payment due date.


30-day payment terms.

Payment must be received within 30 days of work completion, or by the due date specified in the contract.


Payment agreement protections.

Clients cannot require that freelancers accept less than the contract stipulates in exchange for timely payment (ie: “We can pay you faster, but only if you accept less.”)


Contract responsibility.

The burden of having a contract falls on the client – not the freelancer. Clients can face a $250 penalty if they refuse to provide a contract.


Anti-retaliation.

Clients cannot retaliate against freelancer for pursuing payment.


If nonpayment or late payment occurs:

Freelancers must be paid within 30 days of submitting work or the payment due date, as stipulated in the contract. If payment is not received or is received in an untimely fashion, then freelancers may take the following actions:

  • File a court action and litigate against non-paying clients
    • If the court rules in the freelancer’s favor, the judge may award the freelancer:
      • Double Damages: the client will owe the freelancer twice the assessed damage.
      • Attorney fees: Judges may hold the client responsible for the freelancer’s attorney fees
      • No contract fee: Clients can face a $250 penalty if they refuse to work with a contract
      • Civil penalties: Clients with multiple judgements against them may also be subject to civil penalties up to $25,000.
  • File a complaint with the Office of Labor Policy and Standards

Who does the law cover?

The legislation covers New York City freelancers who are:

  • Earning 1099 income
  • Owed over $800 of work in a 4-month period
  • Sole proprietors who:
    • Are not incorporated
    • Are incorporated as either an independent LLC, S-Corp or C-Corp.
    • Do not have employees

The law does not cover:

  • Freelancers earning a W-2 income
  • Businesses with employees
  • Partnership arrangements
  • Lawyers / sales people
  • City workers

FAQs

Does this law apply to clients located outside of NYC?

The intent of the law is to protect freelance workers in NYC. However, many freelancers work with remote clients. If the client’s office is located outside of NYC, and most of their business takes place outside of NYC, they may not be subject to the requirements of the new law.

Ultimately, jurisdiction is up to the court to decide. Concerned freelancers should put a jurisdiction clause into the contract, specifying that any legal actions taken must be reviewed in a NYC court of law. This way, the choice of law is NYC, regardless of the client’s location.

What will happen if a business refuses to use a contract?

Clients are now required by law to use a contract if hiring a freelancer for more than $800 over the course of 4 months.

Business who refuse to use a contract or fail to have a contract with a freelancer could face a fine of $250 in court, provided the freelancer can prove that one was requested.

How do small claims court proceedings differ under the new legislation?

Under the law, clients who are found guilty will now have to pay double damages, and could be held liable for attorney’s fees and additional civil penalties. It’s up to the court to determine damages owed to the freelancer. Once an amount has been decided, the law now requires the court to double that value.

Is this law retroactive?

No, the Freelance Isn't Free Act is not retroactive, meaning all arrangements made before this date should be held to the original agreement. If, however, a client has not paid a freelancer for work completed, they may be subject to the new penalties under the law.

Where can I see the details of the bill?

You can see a PDF of the bill here.


How to be compliant with the law as an employer

Your contracts must include the following:

  • The name and mailing address of both parties
  • An itemization of services to be provided by the freelance worker, the value of the services, and the rate and method of compensation
  • Either a date certain upon which payment is to be made or the mechanism by which such date will be determined

As of May 15, individuals and businesses engaging freelancers for services valued at $800 or more must provide each freelancer with a copy of the operative agreement. Failure to comply with these requirements may result in statutory damages of $250, plus attorney’s fees and costs.

The Act also requires businesses to pay freelancers in accordance with the terms of the written agreement, or, if the agreement does not mention time of payment, within 30 days of completion of services. The Act also prohibits businesses from conditioning timely payment on the freelancer’s agreement to accept less than the agreed-upon payment amount. The Act also prohibits businesses from retaliating against freelancers for exercising rights under the Act.

Finally, the provisions of the Act include a 120-day look back period. Businesses are advised to review all freelance contracts exceeding the $800 threshold for compliance with the law. Moving forward, businesses should train employees with authority to enter into freelance employment agreements on the tenants of the Act.

Disclaimer:

This page is a publication of Freelancers Union. Our purpose in publishing this advisory is to inform freelancers and businesses that hire freelancers about the provisions of the Freelance Isn't Free Act. It is not intended, nor should it be used, as a substitute for specific legal advice as legal counsel may only be given in response to inquiries regarding particular situations.