Freelance work is on the rise as more and more people steer away from the typical 9 to 5 job. Unfortunately, as these new roles emerge, freelancers have found themselves floating in strange waters that would provide them with little to no protection when it came to their job security. However, in recent years, the tide has turned in favor of the freelancers, at least, that's the case for New Yorkers, as on November 22, 2023, Governor Hochul signed the law, Senate Bill (B) 5026 / Assembly Bill (A) 6040.
The signing comes after Governor Hochul initially vetoed a previous version of the bill in December 2022, citing the cost of the legislation and the expansion of the New York State Department of Labor's (NYSDOL) regulatory authority over private contracts between employers and nonemployees. In an interview, Governor Hochul spoke on the importance of laws that ensure the protection of freelancers, "...as freelance work becomes more and more common, we need laws to have strong protections to ensure these individuals are paid fairly for the work they do. This new law is a major step forward for this critical sector of our workforce."
Similar to the new law, in 2016, the New York City Council passed legislation known as the "Freelance Isn't Free Act," which provided freelancers or independent contractors' rights by requiring that certain contracts be in writing, by establishing payment timelines, by prohibiting retaliation, and by establishing an outreach and education program to assist freelance workers. During this time, the Freelance Isn't Free Act also created penalties for violating independent contractors' rights, which included statutory damages, double damages, injunctive relief, and attorneys' fees.
What Does This New Law Provide for Freelancers in NYC?
Senate Bill (B) 5026 / Assembly Bill (A) 6040 will serve to enact the previously mentioned "Freelance Isn't Free Act," providing new protections for freelance workers, as well as mirroring those already provided in New York City. In short, the law will provide protections for “the payment of freelance workers as independent contractors.” The new law will require hiring parties to provide written contracts, timely payment of compensation, complaint procedures, and more. Below, we have broken down some of the key requirements of the new law.
As mentioned, this new law will apply to freelance workers, who are now defined as individuals or organizations who are "hired or retained as an independent contractor by a hiring party to provide services in exchange" for compensation of at least $800 or $800 in aggregate over 120 days. The law will exclude contracts with sales representatives, attorneys, or "any person engaged in the practice of law," licensed medical professionals, and construction contractors. The law will continue to define a "hiring party" as "any person who retains a freelance worker to provide any service," excluding federal, state, and municipal government offices.
Written Contracts Are Required
Whenever a hiring party retains the services of a freelancer, under the new law, the terms of their agreement must be "reduced to writing." The hiring party will be required to "furnish a copy of such written contract, either physically or electronically, to the freelance worker," as well as retain a copy of the written contract for each party involved. At a minimum, the written agreements between hiring parties and freelancers will be required to include the following information:
- Names and mailing addresses of both parties
- An itemization of all services to be provided by the freelance worker
- The value of the services to be offered pursuant to the contract
- The rate and method of compensation
- Dates on which compensation is due
- The date by which a freelance worker must submit a list of services rendered under such contract
Under the law, hiring parties are required to keep the contract for a period of no less than six years and will be required to make the contract available to the commissioner upon request. If the hiring party fails to do so, the terms of the contract presented by the freelancer will be presumed as the "agreed upon terms." Hiring parties and freelancers can locate "model contracts," as provided by the labor commissioner, on the NYSDOL's website.
Timely Payment of Contracted Compensation
The law requires that hiring parties pay their freelancers the contracted compensation "on or before the date such compensation is due" or "no later than thirty days after the completion" of the work if no date is specified in the contract. Once the freelance worker has begun their service under the agreement, the hiring party is prohibited from "conditioning the timely payment of compensation" on the freelancer accepting to be compensated less than the amount agreed to in the contract.
Retaliation Is Prohibited
Hiring parties are prohibited from using retaliation in the form of threats, intimidation, denying work opportunities, discrimination, or otherwise penalizing a freelancer to deter them from exercising their rights under the law. Freelance workers or their "authorized representative" will have the ability to file a complaint with the labor commissioner alleging violations of the law's requirements, seeking an "investigation of such complaint and statement setting the appropriate remedy." Under the law, the labor commissioner will have the authority to perform the following:
- Investigate and equitably remedy disputes between freelance workers and hiring parties
- Take assignments of wage claims from freelance workers
- File lawsuits to collect wages from hiring parties in assigned claims
- Bring together multiple wage claims against a single hiring party in a single action
- Enter into reciprocal agreements with other states to enforce the law
The law will also provide the freelance workers or their "authorized representatives" the right to bring an action alleging violations of the law in "any court of competent jurisdiction for damages." For more information on retaliation, freelancers can contact an attorney today.
What Does This Mean for Employers?
Senate Bill (B) 5026 / Assembly Bill (A) 6040 will be codified as a new Section 191-d of the New York Labor Law and will take effect on May 20, 2024. Before the law is enacted, employers in New York who utilize freelancers will want to take this time to review their current usage of freelancers and the agreements and or contracts used. Employers' agreements should clearly define the terms of the arrangement concerning the compensation of freelancers and ensure they are written and administered in a manner that will support a determination that the freelancer is an independent contractor if this is the intended legal relationship.
To stay in compliance with the new law, employers should monitor NYSDOL's website for information, which they can find here. For more information or if you are a freelance worker in New York and believe an employer has mistreated you, we may be able to help. Contact a Morgan & Morgan attorney today to discover what legal options are available to you.