New York Employers Forcing New Challenges/Changes to Independent Contractor Arrangements
A new law entitled New York's Freelance Isn't Free Act is going into effect and creates new requirements for employers, contracts, payments, and record-keeping, as well as creating anti-discrimination requirements. These apply to any company that hires freelancers.
A review of the law makes it apparent that companies must be aware of the changes and, if necessary, implement changes to their structure.
FIRST: The law defines "freelance worker" very broadly; in essence, anyone hired as an independent contractor.
SECOND: These new obligations apply to contracts with freelancers entered into on or after May 20, 2024.
The law defines who is a "freelance worker" under the Act.
The Act itself states that a freelance worker is…
Any person or organization (of no more than one person)
Any person who is hired or retained as an independent contractor, and…
Any person who is hired to provide services valued at $800 or more.
Put simply… Any independent contractor hired for services of $800 or more is a freelance worker under the Act, and the requirements under the Act apply.
A limited number of freelance workers are exempt under the Act.
The Act has only four narrow exemptions to the definition of freelance worker. The following individuals are not considered freelance workers for purposes of the Act:
Attorneys
Licensed Medical Professionals
Sales Representatives (as defined by law) and…
Construction Contractors (as defined under the Act)
Almost all companies are subject to the requirements of the Act.
Indeed, the Act is rather broad in its scope. Specifically, "hiring party" is defined as any person who retains a freelance worker to provide any service.
The Act requires a number of specific items to be in compliance.
They are:
1) First of all, a written contract is necessary.
The law will require that the hiring party and freelance worker's contract for services must be reduced to writing. In addition, the hiring party provides a physical or electronic copy of the contract to the freelance worker.
2) Second, The Act sets forth the Timing and Manner of Compensation to Freelance Workers
The Act ensures that freelance workers are properly compensated for their services.
The Act requires specific record-keeping requirements for the employer to maintain.
All written contracts entered must be maintained for a minimum of six years.
The Act also sets forth Anti-Discrimination/Retaliation Provisions which…
The Act prohibits any hiring party from harassing, discriminating, threatening, intimidating, disciplining, or denying work opportunities to a freelance worker for exercising, or attempting to exercise, any rights under the Act.
The enforcement of the Act is through civil actions brought by aggrieved freelancers (and their attorneys) or through administrative actions by the New York State Department of Labor.
The Company faces heavy potential risks for non-compliance with the Act, such as the recovery of double damages by the aggrieved freelancer.
Timing:
The Act takes effect on May 20, 2024.
Food for thought:
Most persons engaging in business in New York have or will have procured the services of freelance workers. Consequently, the Act will have legal implications across all industries throughout the state. It is suggested that companies consult with counsel concerning the implications of the Act and amend their contracts and procedures accordingly.
This document is designed for general information only. The information presented in this document should not be construed to be formal legal or tax advice nor the formation of a lawyer/client relationship.
For more information on this and other topics, please contact Kevin via any of the channels listed below:
📧 kevin@kmckernan.com | 📞 718-317-5007