Monday, May 15, 2017, a new law takes effect for businesses using independent contractors in New York City. The New York City Freelance Isn’t Free Act (“FIFA”) makes it easier for freelance workers and independent contractors to collect payment. It also imposes hefty penalties for anyone who does not get agreements in writing and pay on time.
Who FIFA affects
FIFA applies to individuals doing work as independent contractors in New York City. It includes organizations and individuals with no more than one employee, whether incorporated or not, 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 medical professionals.
FIFA applies to services over $800, either in a single contract or in multiple agreements entered during any 120-day period.
FIFA requires that all contracts be in writing and contain at least the following information:
- Name and mailing address for all parties,
- An itemization of the services to be provided,
- The rate and method of compensation, and
- The date payment is due (either an exact date 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: this is not 30 days from delivery of the work or delivery of an invoice. If there are no other express agreements, payment is due 30 days from the time of completion.
In addition, FIFA 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.
FIFA 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. Failure to enter a qualifying contract automatically entitles the independent contractor to a $250 statutory damages award. The penalties to businesses for failing to comply with FIFA can also be assessed up to double the amount due to the freelancer for failing to make timely payment, plus attorneys’ fees. For repeated violators, FIFA imposes a $25,000 civil penalty, payable to the City’s general fund.
What you can do to protect your business
In order to be in compliance with FIFA, make sure all service and independent contractor agreements are in writing and contain an accurate description of the freelancer’s duties, when payment is due or how payment will be calculated, and the contact information of everyone involved. 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. Also, make sure that you have an updated W-9 for all independent contractors that your organization uses for 1099-MISC purposes.
We cannot stress enough the importance of following the above-referenced procedures to protect your business.
Questions, email Lucille Southard at firstname.lastname@example.org or call her at (516) 228-9000, extension 3212.