What New York City’s New Freelancer Law Means for All Small Businesses

One of small businesses’ top complaints is the number of regulations they have to contend with. But that hasn’t stopped New York City lawmakers from adopting another law that could have a big effect on small business.

New York’s City Council, in October, passed a first-of-its-kind city law dubbed the “Freelance Isn’t Free Act” (FIFA); Mayor Bill DeBlasio signed the legislation in November. The law is scheduled to go into effect in mid-May of 2017. The law outlines key payment and contract terms that businesses must abide by when hiring freelancers.

It’s important that all business owners and freelancers become aware of this new law. Whether your business is located in New York City or you hire a freelancer who lives there, you could be subject to this law, which carries stiff penalties for non-compliance. The new law may pave the way for more cities and states to pass their own legislation.

What’s in the freelancer law?

If a business hires a freelancer for $800 or more worth of work over six months (for either one project or a cumulative series of projects), a written agreement must be put in place. The term “freelancer” covers an independent contractor or any other worker not in a traditional employee-employer relationship.

Key items that must be included in the contract include:

  • The name and address of both the employer and freelancer/independent contractor
  • An itemized list of all the services to be performed by the freelancer/contractor, with a value attributed to those services
  • The freelancer/contractor’s rate and method of compensation
  • The specific date when the freelancer must be paid (or a mechanism to determine such date). If a date isn’t provided, the freelancer must be paid no later than 30 days from the completion of the work.

The new law establishes a formal mechanism for the director of the Department of Consumer Affairs to enforce the labor rights of freelancers who are cheated by an employer. It also provides for double damages and attorney’s fees for any freelancer who successfully sues for a breach of the law.

While the law applies to private firms hiring freelancers, unsurprisingly, government agencies are exempt.

The law also provides for various penalties and remedies for non-compliance, as well as anti-retaliation provisions.

Advice for employers

If you are a business owner, review your existing contracts and practices in regard to hiring independent contractors. Consult with an attorney. It will also behoove any employer to visit the newly created New York City Office of Labor Standards before the law goes into effect. The new law provides education resources with sample contracts.

While your business may not be based in New York, nor hiring freelancers based there, you may want to adopt some of the provisions as good business practices.

Also, whether this law covers you or not, make sure that local, state and federal definitions don’t turn a hire you think of as a freelance worker into an employee in the eyes of the government.

Advice for freelancers

If you are a freelancer based in New York City, get up to speed on the rights afforded to you under the new law. As freelancers sign new contracts, they should make sure that the companies are aware of the law and its provisions.

Once the law goes into effect, if you have a problem collecting payment, you can check with New York City’s Office of Labor Standards to figure out a good course of action.

While it’s always good to put all collaborations into writing to ensure both parties are on the same page (no pun intended), laws often have unintended consequences, so make sure to keep an eye on this one as you proceed with running your business or freelance practice.

This article was originally published at Entrepreneur.com.