Freelance Isn’t Free: New York City Reins in Independent Contractors, One Work Provider at a Time
New York City’s Freelance Isn’t Free Act (or FIFA, for short) is not just an attention-grabbing name, but game-changing legislation that has imposed unprecedented regulations on the Five Borough “gig economy.”
FIFA, which was passed into law last October and took effect Monday, May 15th, requires all freelance services worth at least a combined $800 over the previous 120 days to be memorialized as written agreements. Except for sales representatives, lawyers, and licensed medical professionals, FIFA covers anyone “hired or retained as an independent contractor . . . to provide services in exchange for compensation.” That includes your friendly neighborhood Uber driver, Postmates courier, and Airbnb concierge.
For now, the agreements must include the freelancer and hiring party’s names and addresses; itemize and value the freelancer’s services to be provided; and specify the rate, method, and timing of payment to the freelancer for those services. Other requirements may be added at the whim of New York City’s newly created Office of Labor Policy & Standards (OLPS). Hiring parties that violate these written contract requirements and are sued by their freelancers must pay $250 and the freelancer’s costs and reasonable attorney’s fees, and FIFA prohibits retaliation against freelancers that seek relief under this, or any other provision, of the Act.
FIFA is about more than just scribbling terms onto a piece of paper and imposes even steeper penalties on hiring parties that breach their ends of the bargain. If a hiring party fails to compensate freelancers according to the agreed-upon rate, method, and timing of payment following “completion of services,” or attempts to underpay freelancers after they have “commenced performance” of the agreed-upon services, the freelancer has up to six years to file a civil suit and obtain injunctive relief, double damages, and costs and reasonable attorney’s fees.
Instead of going directly to court, freelancers may file an investigative complaint and pass the torch to the OLPS Director, which may then take civil action. When there is “reasonable cause” to believe that hiring parties have established a pattern or practice of violating the Act, FIFA empowers New York City Corporation Counsel to file a lawsuit on its own initiative and seek up to $25,000 in civil penalties.
Analysis and Pitfalls for Hiring Parties
Because FIFA is the first law of its kind, there are bound to be growing pains as the OLPS figures out the role it wants to play. This could include swift and draconian selective enforcement, aimed at making an example out of an unlucky few hiring parties in order to place all others on notice.
There are many ambiguities built into the law itself. While FIFA defines a freelance worker as an individual “hired or retained as an independent contractor,” it does not specify who is an independent contractor. As HR Legalist has previously reported, the alleged misclassification of gig economy employees as independent contractors has created a hotbed of litigation throughout the nation, and hiring parties defending against FIFA lawsuits could face a double whammy from the New York or United States Departments of Labor for failing to properly categorize their freelancers as employees.
FIFA also fails to define the meaning of “commencement” or “completion” of services. While the law is presumably intended to prevent unscrupulous hiring parties from denying freelancers compensation rightfully owed, it can just as easily empower lazy or unethical freelancers to demand full payment for shoddy or unfinished work. To add insult to injury, the enacted version of the law removed a safe harbor provision from an earlier draft that “d[id] not preclude the settlement of a good faith dispute regarding performance under the contract or preclude a modification of a contract in accordance with other applicable law.”
If they haven’t done so already, “gig economists” with operations in the Big Apple (or any other work provider that works with freelancers) should take the time to ensure that their form contracts contain all of the terms and conditions as required by FIFA currently, and be prepared to make more changes on a whim if and when the OLPS flexes its muscles and creates additional requirements. Hiring parties in other cities should be prepared for copycat laws, and only time will tell how quickly—and zealously—the rush to rein in the gig economy will spread.
As always, we at HR Legalist urge readers to reach out to preferred legal counsel if ever in doubt about this, or any other labor and employment issue.