If you do business with an independent contractor working from New York City, there is a new law that applies to the relationship, effective May 15, 2017. This affects everyone who contracts with any of the estimated 4 million freelance workers in NYC.
The New York City Freelance Isn’t Free Act (FIFA) makes it easier for freelance workers and independent contractors to collect payment. It also comes with hefty penalties for anyone who does not get agreements in writing and pay on time.
To whom does the law apply?
FIFA applies to individuals doing work as independent contractors in New York City. It includes individuals or organizations with no more than one employee that provide services in exchange for compensation. It does not matter whether the hiring person or organization is located in New York City.
It excludes sales representatives, attorneys, and licensed health care workers.
What contracts are covered?
FIFA applies to services over $800, either in a single contract or in multiple agreements entered during any 120 day period.
What does the law require?
FIFA requires that all covered contracts be in writing and contain at least this information:
1) name and mailing address for all parties,
2) an itemization of the services to be provided,
3) the rate and method of compensation, and
4) the day payment is due (either an exact day or how to calculate it).
If there is no specific date for payment, the default is 30 days from the date the contractor completed the work. Note that this is not 30 days from delivery of the work or delivery of an invoice, for example. If there is no other express agreement, payment is due 30 days from the time of completion.
In addition, the law makes it illegal to retaliate against a freelancer for asserting rights protected under FIFA or to condition payment to the freelancer on acceptance of less than the previously-agreed-upon amount.
What are the penalties for noncompliance?
The law provides an administrative complaint process with the NYC Office of Labor Standards (OLS) and even allows the freelancer or the City to bring a civil lawsuit. Penalties available to the freelancer include $250 for failing to provide a written contract to double the amount due for failing to make timely payment, plus attorneys’ fees. For repeated violators, the City can recover up to $25,000 in fines.
What to do:
Make sure all service and independent contractor agreements are in writing and contain a good description of what the freelancer will do, when payment is due or how the payment due date will be calculated, and the contact information for everyone involved.
Then make sure that your organization makes the payments on time. If your organization normally takes longer to pay, account for that when agreeing on payment dates for all future agreements.
To see the text of FIFA, click here and go to the Text tab.
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Note: This post is provided for information purposes only and does not constitute legal advice. It is not a substitute for legal advice.