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Written Contracts for Freelance Workers Now Required

Originally planned for May, the requirements of New York State’s Freelance Isn’t Free Act (“FIFA”) became effective August 28, 2024. The law has flown under the radar for many employers.  The Act is part of steadily increasing regulation and scrutiny of the work of independent contractors, broadly characterized as any workers, including individuals, classified as paid and pursuant to an IRS 1099 and not considered an organization’s employee. 

FIFA defines “freelance” worker as any individual or organization comprised of no more than one individual engaged to provide services regardless of the workers corporate form. The law excludes attorneys, licensed medical professionals, construction workers and sales representatives.

Understanding compliance with the law requires both an understanding of the specific requirements for freelance workers as well as a threshold understanding of which workers should even be classified as independent contractors in the first instance. 

Compliance with FIFA can be deceptively straight forward. The law applies to “hiring parties” and freelance workers where the services provided are valued at $800 or more over a consecutive 120-day period. The $800 threshold can be met either on a single project or be based on an aggregate value of multiple projects performed over 120 days. The law requires a written contract covering the basic terms of the engagement, including: names and addresses, a statement of services to be performed, payment details including amounts and due dates, and any specifics the freelancer must follow to allow the hiring party to meet their internal administration requirements. The New York State Department of labor has posted a model contract on its website.

Hiring parties failing to meet their payment obligations under the contracts can be assessed damages double the amount owed plus attorney fees. Other penalty assessments are possible as well. The law also contains anti-discrimination and retaliation provisions protecting workers from exercising their rights under FIFA. Contracts with freelance workers must be kept for a minimum of six years and made available to the New York State Commissioner of Labor upon request.

Employers are cautioned that technical compliance with the Freelance Isn’t Free Act offers no protection from potential liability associated with an underlying misclassification of the worker as an independent contractor. Whether any worker is considered “independent and properly compensated as an IRS 1099 worker remainsdetermined by a number of situation specific, interrelated factors, including: whether the worker is free from supervision, direction and control in the performance of their duties, offers their services to the general public, has an established business, pays their own expenses, sets their own schedule, is free to refuse work, assumes the risk of profit or loss, and others.

Employer with questions about FIFA compliance or properly classifying independent contractors in their organizations are encouraged to contact the firm for more details.

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