New York Passes Law Protecting Freelancers with Mandatory Contracts and Timely Payment Rules

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On November 22, 2023, Governor Kathy Hochul signed into law the “Freelance Isn’t Free Act” (FIFA), which provides comprehensive protections for freelance workers in New York State. Amended on March 1, 2024, the law is codified in Article 44-A of the New York General Business Law and goes into effect on August 28, 2024. The act aims to ensure that freelance workers receive timely compensation and have clear legal protections in their business dealings.

Who is Covered by the Act?

The Act applies to “freelance workers” defined as any individual or solo business entity hired as an independent contractor by a hiring party to provide services valued at $800 or more, either in a single contract or over several contracts within 120 days. However, certain professionals, such as licensed attorneys, medical professionals, construction contractors, and sales representatives, are excluded from this definition.

The term “hiring party” broadly encompasses any person or entity that retains a freelance worker, with the exception of local, state, and federal government entities. This means that most individuals and organizations hiring independent contractors must comply with the Act’s requirements.

Key Requirements of the Act

The Act mandates several requirements for hiring parties:

1. Written Contracts: All agreements with freelance workers must be documented in writing. The contract must include the names and addresses of both parties, a detailed description of the services to be provided, the rate and method of payment, and the payment due date or terms for determining the due date. The hiring party must retain a copy of the contract for at least six years, and the contract must be provided to the freelance worker in either physical or electronic form. If the hiring party fails to provide a written contract, there is a presumption that the terms presented by the freelancer are the agreed terms.
2. Timely Payment: Freelancers must be paid by the date specified in the contract. If the contract does not specify a due date, payment must be made within 30 days after the completion of services. The hiring party cannot require freelancers to accept less than the agreed payment in exchange for faster compensation.
3. Anti-Retaliation Protections: The Act prohibits hiring parties from discriminating or retaliating against freelancers who assert their rights under the law.

Enforcement and Penalties

The New York State Attorney General is authorized to enforce the Act and can file lawsuits against hiring parties on behalf of affected freelancers. Freelancers also have the right to pursue private legal action in cases of violations. The statute of limitations for claims varies—two years for contract violations and up to six years for claims related to timely payment or retaliation.

Civil penalties can be substantial. A first-time violation may result in a $1,000 penalty, increasing to $2,000 for a second violation and $3,000 for subsequent offenses. If a pattern of violations is established, fines can reach up to $25,000. Additionally, freelancers can recover double the damages for delayed payment, plus attorney fees and other costs.

Alignment with New York City Law

FIFA closely mirrors the “Freelance Isn’t Free Act” implemented in New York City in 2017, which also mandates written contracts and timely payment. While the state and city laws have similar definitions and provisions, FIFA introduces additional requirements, such as record retention and mandatory provision of written contracts. However, FIFA explicitly states that it does not override New York City’s existing law.

Preparing for Compliance

With the August 28, 2024, effective date approaching, organizations and individuals who engage freelancers in New York must prepare to comply with FIFA’s requirements. This involves updating internal procedures for hiring freelancers, ensuring contracts meet the new legal standards, and being prepared for potential enforcement actions by the Attorney General.

The “Freelance Isn’t Free Act” sets a precedent for freelance protections at the state level and represents a significant step forward in safeguarding the rights of independent workers in New York.