NYC Freelancers Due Contracts, Timely Pay

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By John Herzfeld

Freelance workers in New York City will gain the right to written contracts and timely payment May 15. The labor protection unit in the city’s Department of Consumer Affairs is geared up to carry out the pathbreaking law.

“It’s all systems go,” Deputy Consumer Affairs Commissioner Liz Vladeck, who heads the DCA’s Office of Labor Policy and Standards, told Bloomberg BNA May 10. “We’ve had a team working hard at the agency, together with organizations in the city, to have the infrastructure in place.”

The first year of implementation will serve as a trial period as the city gathers information toward possible changes, advocacy groups seek to encourage workers to use the protections, and employment lawyers urge hiring parties to take precautions to comply with its terms.

Hiring parties should take “self-help measures” to address their potential exposure under the Freelance Isn’t Free Act by making precautionary language standard in their written contracts, Richard J. Reibstein, an attorney with Pepper Hamilton LLP in New York who advises management on employment matters, told Bloomberg BNA.

The law was passed unanimously by the Democratic-controlled City Council and was signed by Mayor Bill de Blasio (D) last fall. It sets specific requirements for hiring independent workers in the growing gig economy.

Freelancers will have the right to a written contract for work paying a total $800 or more over a 120-day period. The contract has to spell out the work to be done, the pay, and date when is due. If no date is specified, payment is due within 30 days of the completion of the work.

Companies would face additional penalties if they are found to have violated anti-retaliation provisions that bar them from penalizing, threatening or blacklisting a freelancer for exercising rights provided under the law.

The anti-retaliation provision should be addressed in the contract by terms that neither party has any obligation to continue the work relationship after completion of the engagement or to consider the other party for future services, Reibstein said. Hiring parties should also take care to structure, document and implement their freelancer relationships in a way that enhances compliance with federal, state and local laws governing independent contractors.

Double Damages Possible

Damages equal to double the value of the contract, plus attorneys’ fees, would be available to freelancers who prevail in their complaints against hiring parties, which would go to the courts if a letter from the city doesn’t resolve them.

The law also provides for the city to bring pattern-and-practice cases for pervasive violations, carrying maximum penalties of $25,000.

The law covers people in various industries who run their own business and have specialized skills, capital investment and the ability to negotiate job terms, the city said in a fact sheet on the law.

Many Job Types Covered

The most common industries for freelancing include film and video, graphic and web design, home contracting and repair, media, photography, and translation services, the city said. Exceptions cover certain sales representatives, attorneys and licensed medical professionals, as well as workers defined as employees under a collective bargaining agreement.

But the law’s terms also can apply under certain circumstances to workers in home care, day care, cleaning, maintenance and construction, Vladeck said. The coverage “isn’t across the board” by job title but depends on legal criteria for the nature of the work arrangement and the work relationship in a given situation, she said.

The scope of the law applies to work performed in New York City, Vladeck said.A model contract will be posted on the agency’s website, offering a template intended to be “as basic and universal as possible,” she said.

Navigation Help for Workers

The city’s preparations also include technological capacity, staffing and development of a navigation service to help workers take unresolved cases to court, Vladeck said.

“We don’t adjudicate these cases,” Vladeck said. “These are fundamentally breach of contract claims, so the courts are where they should be decided.” But the city will try to facilitate resolution of the complaints and, if that’s not possible, help guide workers on what they should do next, she said.

The navigation service set by the law will offer education to independent workers facing “complex regulatory schemes” and “direct them to the right resources,” she said. “These are basically wage theft cases, and we don’t want them to have to start from scratch.”

A complaint will generate a letter from the city to the hiring party identified by the worker and ask for a response. Failure to respond to the city letter would create a rebuttable presumption in court that the pay is due, Vladeck said.

Model for Other Places?

City officials and the bill’s sponsors and supporters said they hope the law will serve as a model for states and other cities to enact similar measures, as the labor policies of the administration of President Donald Trump emerge.

“We’re seeing states and cities step into the gap that we have to assume is coming in federal labor law enforcement,” Vladeck said. “This law represents a rebalancing that we knew would be needed before anyone could have reasonably predicted the outcome of the presidential election, but now it’s more important than ever to create new approaches to worker standards in our own communities.”

The law’s lead sponsor, Council Member Brad Lander (D), said May 11 that he hasn’t given up on eventual bipartisan congressional action on freelancer protections. Two of the three Republican council members who voted for the bill endorsed Trump for president, he noted.

“It’s a pretty straightforward American idea that you should have a contract for work and get paid on time,” he told Bloomberg BNA. “We hope the Republicans in Congress will recognize that. But I’m not holding my breath.”

App Links Freelancers to Lawyers

The 350,000-member Freelancers Union, one of the prime advocates for the city legislation, launched a phone application to link independent workers to legal services, the group’s president, Sara Horowitz, told Bloomberg BNA May 10.

“When freelancers get stiffed, they’ll be able to use the app to get recommendations for two lawyers to provide them with immediate help,” she said. The union helped to craft the city law and get it passed, she said, and now looks forward to helping to enforce it as “the next new-era safety net.”

The city law has “leveled the playing field, but we don’t have to wait for government action,” Horowitz said.

Unanswered Questions?

Reibstein said May 9 that numerous questions remain about the terms of the law.

“There are many positive aspects of this law, but it does need considerable tweaking to make it evenhanded and provide greater clarity to the contracting parties,” he told Bloomberg BNA.

Among the uncertainties are what connections to New York City are needed to invoke the law’s coverage, whether a complaining worker is truly an independent contractor, how the hiring party will know of that status and what will constitute satisfactorily completed work, Reibstein said.

He also said the law should explicitly afford hiring parties a good-faith defense like those available in state and federal labor standards laws.

Many of the questions of the parameters of coverage, standing, jurisdiction and interpretation will be decided by the courts, he said, but “that’s years down the road.”

It’s common in freelance arrangements to pay an independent contractor only after receiving an invoice or statement of completion of the work, but the new law lacks such a requirement, Reibstein said. “That alone would eliminate most disputes,” he said.

The law’s anti-retaliation provision, with a six-year statute of limitations, may be “the scariest part,” Reibstein said. Retaliation might consist of just telling the freelancer that “we won’t be working together again,” he said.

Pretext Might Be Claimed

Even if the hiring party clearly states that poor work quality is the reason the freelancer won’t be getting more assignments, that could be challenged as a pretext and become the subject of time-consuming factual discovery, Reibstein said.

Hiring parties anywhere could come under the law’s scope if a freelancer works in New York City, a status that can be hard to determine or define from a distance in various scenarios, said Lisa H. Cassilly, a management attorney with Alston & Bird LLP based in New York and Atlanta.

“Unwary purchasers of independent contractor services face some degree of uncertainty and might find themselves ensnared by these obligations,” she told Bloomberg BNA May 10.

One potential work-around, she said, would be for hiring parties to include in a written letter of agreement that they have the right to select the legal forum and make the choice of law in the event of any dispute. That would guard against companies from around the U.S. having to enlist local defense representation in a New York court, she said.

No Shortage of Lawyers

The law’s provision of attorneys’ fees for prevailing complainants offers incentive for lawyers to represent freelancers, Cassilly said.

“You won’t see a shortage of lawyers willing to take these cases,” she said. “If hiring entities aren’t careful, they could end up paying their own legal costs and the complainant’s. If the disputes are lengthy, that could add up.”

Cassilly said her advice overall would be “to err on the side of caution and do what’s necessary to comply with this law if you have reason to believe you’re dealing with a sole independent contractor who will be working in New York.”

To Be Continued?

The remaining uncertainties should be addressed through regulatory steps by the city and statutory changes by the City Council, Reibstein said, noting that the law calls for the city to report to the council on the its implementation after a year has passed.

“This is a first-of-its-kind law,” said Vladeck, with “a unique and robust research requirement” to collect and analyze data on the track record for the first year. Part of the technological capacity built for the May 15 opening day is devoted to collecting that data and reporting it to the City Council, she said.

Lander expressed willingness to revisit the law’s terms. “I don’t buy that there really are that many complicated questions,” he said, but council members “will be eager to see if it’s necessary to make adjustments to this law.”

To contact the reporter on this story: John Herzfeld in New York at jherzfeld@bna.com

For More Information

Text of the law is at http://src.bna.com/oGU. Legislative history and background is at http://src.bna.com/oGS. Information on enforcement is at http://src.bna.com/oMP. Information on Freelancers Union activities is at http://src.bna.com/oMG. A May 9 Pepper Hamilton LLP analysis of the law is at http://src.bna.com/oME.

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