A pervasive problem well known to many artists, photographers, and other creative persons who work on a freelance basis, is getting paid on a timely basis in the agreed amount for the work created. Often the freelancer is left without any effective recourse.
To address this issue for work performed in New York City, a new law, New York City Administrative Code, Section 1, Title 20, Chapter 10, Freelance Workers (the “Act”), to protect freelance workers was passed and becomes effective on May 15, 2017.
As a result, both those who hire Freelance Workers and those who provide freelance services need to be aware of these new legal obligations.
A. Summary of the Act.
The Act is intended to enhance protections for freelance workers. Specifically, these protections extend to the right to have written contracts, the right to be paid timely and in full, and the right to be free of retaliation.
The Act creates penalties for violations of these rights, including statutory damages, double damages, injunctive relief and attorney’s fees. Individual causes of action may be brought in state court. In addition, the New York City Corporation Counsel is granted the authority to bring civil actions on behalf of New York City, to recovering civil penalties of not more than $25,000 where there is evidence of a pattern or practice of violations. Finally, the Act requires the Director (“Director”) of the Office of Labor Standards (“OLS”) to receive complaints, create a navigation program, and to gather data and report on the effectiveness of the Act.
B. Freelance Worker.
The Act defines the term “Freelance Worker” as any natural person or any organization 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.
Specifically excluded from the definition is any person who is a sales representative pursuant to the contract at issue; any person engaged in the practice of law pursuant to the contract at issue; or any person who is a licensed medical professional.
However the Act includes a provision that nothing in it shall be construed as providing a determination about the legal classification of any individual as an employee or independent contractor. Therefore, to qualify under the Act, the Freelance Worker must prove that the Freelance Worker was hired or retained as an independent contractor and not as an employee. Accordingly, the often thorny threshold determination as to whether the person is an employee or independent contractor still must be decided under applicable Federal or State law. The Act certainly covers photographer assistants, graphic designers, producers and those who perform similar services and who are not treated as employees.
C. Hiring Party.
A “Hiring Party” is defined as any person who retains a Freelance Worker to provide any service, with the exceptions of the United States government, New York State, New York City, and any other local government, municipality or county or any foreign government.
D. Written Contract.
A written contract will be required under the Act whenever a Hiring Party retains the services of a Freelance Worker and the contract has a value of $800 or more, either by itself or when aggregated with all contracts between the parties during the 120 days immediately preceding the contract.
The contract must include, at a minimum:
1) The name and mailing address of both parties;
2) An itemization of all services to be provided by the Freelance Worker, the value of the services, and rate and method of compensation;
3) The date on which the Freelance Worker will be paid the contracted compensation, or if not immediately determinable, the mechanism by which the date will be determined;
4) Such additional terms as the director of the OLS establishes to ensure that the parties understand their respective obligations under the contract.
These are some of the basic terms to any contract and, presumably, could be satisfied where the services are not extensive such as a one day assignment, by a simple one page agreement.
E. Unlawful Payment Protections.
1) The agreed payment must be made, except as otherwise provided by law, on or before the date due under the terms of the contract, or if no such date is specified, no later than 30 days after completion of the Freelance Worker’s services under the contract.
2) Once the Freelance Worker commences performance of the services under the contract, the Hiring Party cannot require the Freelance Worker to accept less compensation than the contracted amount as a condition of timely payment. Presumably, this provision assumes that there is full or substantial compliance with the scope of services to be rendered. However, as under existing law, use by the Hiring Party of the result of the services would probably require payment.
F. No Retaliation Permitted.
The Hiring Party is not permitted to threaten, intimidate, discipline, harass, deny a work opportunity to or discriminate against a Freelance Worker, or take any other action that penalizes a Freelance Worker for, or is reasonably likely to deter a Freelance Worker from, exercising or attempting to exercise any right guaranteed under the Act, or from obtaining any future work opportunity because the Freelance Worker has exercised such right.
This is a broad definition and is intended to cover all types of retaliation.
G. Procedure to Complain to Director.
The Act sets forth a procedure for a Freelance Worker who believes a violation of the Act has occurred to file a Complaint with the Director. The Statute of Limitations for filing such a complaint is two years from the date the acts are alleged to have occurred. However, there is no jurisdiction under this procedure where either party has initiated a prior civil action or filed a claim or complaint before any administrative agency.
Accordingly, since the Statute of Limitations for breach of contract is six years from the date payment is due, that six year period is not waived if the complaint is not timely filed with the Director.
H. Civil Court Action.
a) Attorney’s Fees (All Sections). A prevailing plaintiff under any section of the Act shall be awarded reasonable attorney’s fees and costs. This is a significant benefit to Freelance Workers since most of the claims may not be cost effective if legal fees are incurred.
b) Section 20-928 (Not Providing a Written Contract). A Freelance Worker alleging a violation of this section can bring an action in any court of competent jurisdiction. However, a prerequisite to a suit under this section is proof that the Freelance Worker requested a written contract from the Hiring Party before the contracted work began.
Such proof is not required if violations are also claimed under other sections such as for non-payment. The purpose of this requirement would appear to prevent liability to a Hiring Party who timely paid the Freelance Worker and complied with the other requirements of the Act.
c) Section 20-929 (Unlawful Payment Practices). In addition to any other damages awarded elsewhere in the Act including reasonable attorney’s fees and costs, this section provides for double damages, injunctive relief and other appropriate remedies. The statute of limitations under this section is six years.
d) Section 20-930 (Retaliation). Statutory damages equal to the value of the underlying contract are available for each violation.
e) Section 20-934 (Pattern or Practice). New York City corporation counsel may commence a civil action on behalf of the city where reasonable cause exists that a Hiring Party is engaged in a pattern or practice of violations of the Act, and injunctive relief, civil penalties of not more than $25,000, and any other appropriate relief are authorized. A Freelance Worker may also commence an action based upon the same facts.
I. Navigation Program.
A navigation program is to be established by the Director to provide information and assistance to Freelance Workers. It will include online information and actual telephone and email assistance by a “natural” person. The Director is also to make available model contracts on an applicable OLS website in English and the six languages most commonly spoken by limited English proficient individuals in New York City.
This is an ambitious program. If it works, it can be of significant assistance to Freelance Workers who lack knowledge or access to this information. However, given that this will be a city government agency, the jury will remain out for some time as to its effectiveness.
J. Effective Date of Act.
The Act takes effect on May 15, 2017, and applies only to contracts entered into on or after its effective date, except that the Director is required to take any actions necessary to implement this Act, including promulgation of rules, before the effective date.
This would appear to be a significant step towards attempting to protect Freelance Workers against some of the abuses now found in the market place. How effective it will turn out will be determined in no small part by the success of the navigation program to be established by the Director.
For those who fall within the definition of Hiring Party and customarily provide written contracts to Freelance Workers, no change should be necessary in their practices. However, for those who do not provide written contracts or do not pay fees on a timely basis, it is now time to correct these situations and do so.