New York City Employers: Rules Implementing Freelancer Act Take Effect

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New York City's Freelance Isn't Free Act—which provides certain protections for freelance workers—took effect in May. But businesses in the Big Apple should also be aware of new rules implementing the act, which will take effect July 24.

The new rules "clarify provisions in the law, establish requirements to implement and meet the goals of the law, and provide guidance to covered hiring parties and protected freelance workers," according to a New York City Department of Consumer Affairs notice.

Businesses in the city need to know that there is an increased level of scrutiny on independent contractor relationships, said Cindy Schmitt Minniti, an attorney with Reed Smith in New York City. Businesses that hire freelancers for nonemployment engagements, like freelance or contract work, need to look at each arrangement very closely and make sure the appropriate documentation is in place, she said.

The rules reinforce the city's position that businesses shouldn't abuse freelancer relationships, said Richard Greenberg, an attorney with Jackson Lewis in New York City. The added rules may be a hassle for businesses, but at the end of day, requiring them to put very specific terms into their agreements can help protect them from arguments about contract ambiguities later down the road, he noted.

Greenberg added that companies using freelancers should also be familiar FAQs about the act.

[SHRM members-only toolkit: Employing Independent Contractors]

The Rules

The act established protections for freelance workers in the city who perform services valued at $800 or more. Under the law, businesses must:

  • Execute a written contract with freelancers.
  • Make timely, full payments for contract work.
  • Refrain from retaliating against workers who exercise their rights under the act.

Among other things, the rules clarify that a freelancer agreement can't include:

  • A waiver of—or limitation on—the rights provided under the act.
  • A class- or collective-action waiver.
  • A waiver of procedural rights that are normally afforded to parties in a civil or administrative action. Minniti noted that this rule appears intended to invalidate mandatory arbitration provisions in independent contractor agreements.
  • Confidentiality provisions that would limit a freelancer's ability to file a complaint with the director of the city's Office of Labor Policy and Standards.

The rules also clarify that the act's anti-retaliation provisions protect freelancers from any adverse actions by a hiring party "that would constitute a threat, intimidation, discipline, harassment, denial of a work opportunity or discrimination" or that would penalize or deter freelancers from exercising their rights under the act.

Additionally, the rules state that the act applies to contractors regardless of their immigration status.

Employers that violate the act may face steep penalties.

HR Tips

"There's a lot of news about this act, but it's really just another law telling businesses to make sure their workplace is properly classified and that workers are treated fairly," Minniti said.

As a first step, HR professionals should evaluate whether their freelancers are truly contractors, or if they are actually employees, Greenberg said. A business that has a lot of contractors may need to take a step back to figure out if those workers are really performing core jobs, he added.

Next, if the contract relationship is appropriate, businesses need to come up with a master agreement that contains the required terms under the act and doesn't have any ancillary terms that aren't allowed, he said.

Minniti said agreements should then be tailored to the individual and the specific assignment. "It's possible that the independent contractor agreement on file initially reflected the engagement accurately but the relationship has changed," she noted, adding that businesses need to make sure they are paying freelancers in accordance with the contract terms.

HR professionals also need to understand and be involved in the process that their business uses to engage independent contractors. "HR may be in control of employment, but hiring managers might think they can bring on contractors without consulting HR," she said. "It's important to make sure everything runs through HR so that there are constant and compliant practices."

 

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