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Freelance Isn’t Free: What Freelancers and Those Who Hire Them Should Know

New York City’s first in the nation law protecting freelancers from wage theft went into effect on May 15, 2017. The goal of the legislation is to provide the more than one million New Yorkers who work as freelancers or independent contractors with protections from wage theft. The law requires that freelancers receive a written contract, timely and full payment, and protection from retaliation. Freelancers or independent contractors and the people or companies who hire them need to know the requirements of this law to avoid monetary penalties, and potential jail time.

Any company or individual, known as the “hiring party,” which hires someone who is not an employee to perform more than $800 of work in any 120-day period must execute a simple written contract. The contract can be a simple email, but in whatever form, it must describe the work to be completed, the rate and method of payment, the date when the payment is due and basic contact information for both parties. The Department of Consumer Affairs has created sample contracts to use as a guide.

The hiring party must pay the freelancer on or before the date specified in the contract. If they have not included the payment terms in the contract, payment must be made within 30 days of the work being completed.

Freelancers have multiple avenues for complaint against the hiring party under the new law -- they can file a complaint with the Department of Consumer Affairs’ Office of Labor Policy & Standards or sue in state court. The Department has set up a Court Navigator program, and has released this guide, providing freelancers with information to bring a claim. The statute also provides for reasonable attorneys’ fees for freelance workers who bring claims, which generally creates a market for lawsuits by encouraging claimants to hire an attorney.

Employers also have resources provided to them, which they should consult when entering into a contract for freelance work. If a hiring party refuses to enter into a contract, they may be ordered to pay the worker $250; if they refuse to enter into a contract and violate any other provision of the law, the hiring party may be responsible for damages equal to the value of the contract. If the hiring party does not pay the freelancer on the payment due date or within 30 days of completion of work, if there is no due date, the worker may be entitled to double damages, injunctive relief and other remedies. Hiring parties who are found to have retaliated against the worker may owe them damages equal to the contract for each retaliation violation. Companies or individuals who are found to have demonstrated a pattern or practice of violating the law, could be liable for up to $25,000 in damages.

Bottom line: to avoid penalties, hiring parties should enter into contracts with their freelancers that include the necessary terms, and must pay on time. Freelancers have many resources to ensure that the people and companies hiring them are following the law, and now have remedies available if they are not paid as agreed or required by law.