What New York City's New Freelancer Law Means for All Small Businesses

One of small businesses’ top complaints is the number of regulations they have to contend with. But that hasn’t stopped New York City lawmakers from adopting another law that could have a big effect on small business.

New York’s City Council, in October, passed a first-of-its-kind city law dubbed the “Freelance Isn’t Free Act” (FIFA); Mayor Bill DeBlasio signed the legislation in November. The law is scheduled to go into effect in mid-May of 2017. The law outlines key payment and contract terms that businesses must abide by when hiring freelancers.

Related: Think Twice Because Your Freelancer Might Legally Be an Employee

It’s important that all business owners and freelancers become aware of this new law. Whether your business is located in New York City or you hire a freelancer who lives there, you could be subject to this law, which carries stiff penalties for non-compliance. The new law may pave the way for more cities and states to pass their own legislation.

What’s in the freelancer law?

If a business hires a freelancer for $800 or more worth of work over six months (for either one project or a cumulative series of projects), a written agreement must be put in place. The term “freelancer” covers an independent contractor or any other worker not in a traditional employee-employer relationship.

Key items that must be included in the contract include:

  • The name and address of both the employer and freelancer/independent contractor
  • An itemized list of all the services to be performed by the freelancer/contractor, with a value attributed to those services
  • The freelancer/contractor’s rate and method of compensation
  • The specific date when the freelancer must be paid (or a mechanism to determine such date). If a date isn’t provided, the freelancer must be paid no later than 30 days from the completion of the work.

The new law establishes a formal mechanism for the director of the Department of Consumer Affairs to enforce the labor rights of freelancers who are cheated by an employer. It also provides for double damages and attorney’s fees for any freelancer who successfully sues for a breach of the law.

Related Book: The Tax and Legal Playbook by Mark J. Kohler

While the law applies to private firms hiring freelancers, unsurprisingly, government agencies are exempt.

The law also provides for various penalties and remedies for non-compliance, as well as anti-retaliation provisions.

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