With more of the labor pool moving into the gig economy, a new law protecting freelancers has gone into effect in New York City.

The Freelance Isn’t Free Act (“FIFA”) is a straight-forward piece of legislation that makes it easier for freelancers to file claims against your company. The odds are good that other jurisdictions will adopt similar protections, so adopting a legally compliant approach to engaging and dealing with freelancers should be on your company’s to-do list.

When does FIFA apply to your company?

If your freelancer is domiciled in NYC, the contract is governed by NY law or the work is performed in NYC, you may have to answer to any complaints raised by a freelancer under FIFA.

A “freelancer” is any person or one-person entity your company has engaged to provide services, with the exception of a sales representative, an attorney or a medical professional. This means that the graphic artist, stylist, photographer or web designer you hired could fall under the protections of FIFA.

For FIFA to apply, the value of the services have to be at least $800 over a 6-month period, even if the services are for varied and unrelated projects. In other words, cumulative obligations to pay a freelancer at least $800 over a 6-month period are sufficient to meet the amount-in-controversy requirement.

If FIFA is applicable, what must your company do?

Your company must:

1. provide the freelancer with a written contract, containing at a minimum (a) the identity of the parties, (b) a description of the services to be provided, and (b) the payment obligations (i.e. amount and timing). (If the payment timing is not included, the law will assume payment terms of Net 30.)
2. make payments to the freelancer on time.
3. not condition timely payment on the freelancer accepting an amount that is lower than what was originally negotiated.

Why should your company be concerned over FIFA?

Under FIFA, a successful plaintiff will be awarded her damages and attorney fees. This means the historical barrier to these disputes has been removed. Plaintiff’s attorneys will now express an eagerness to represent freelancers, sensing a much better chance of getting paid if the matter has merit. Your company could therefore see an uptick in formal claims brought by freelancers, represented by hungry and aggressive counsel.

Also, under certain circumstances the freelancer will have the right to be awarded double the damages alleged. In addition, where there is evidence of a pattern or practice of violations, there could be a civil penalty up to $25,000.

While the amounts here may be small in comparison to your company’s overall labor expenses, keep in mind the public relations aspect. The damage caused to your company’s reputation for having stiffed a freelancer could be significant. In the early life of FIFA, companies caught up in these claims could be used as examples in the media by the Department of Consumer Affairs.

How can your company avoid liability under FIFA?

In order to avoid liability, do the following:

1. have your attorney prepare a template freelancer agreement and make it your company’s policy to use it every time you hire a freelancer.
2. pay your freelancer the negotiated amount and make those payments on time.
3. do not retaliate against a freelancer who has filed a complaint against your company under FIFA.
4. do not ignore informal demands made by freelancers for non-payment or failure to pay the total amount negotiated.

©2017 Fabio R. Silva. All Rights Reserved.