More Protections Anticipated for Freelance Workers and Independent Contractors

A frequent misunderstanding among business owners is the difference between an "employee" and an "independent contractor" or "freelance worker." I have written about this before. Well, for those businesses intent on classifying their workers as "freelancers," you now have more to worry about.

The New York State Legislature recently passed a Bill that would mandate the use of certain contractual forms and certain contract terms for businesses that use freelance workers.  If it becomes law, it will impose additional requirements on businesses.  

The Bill defines a "Freelance Worker” as an individual engaged as "an independent contractor by a hiring party to provide services.” A pretty broad definition. The law, however, would cover only individuals providing services for more than $800 during the preceding 120 days and excludes certain occupations and trades, for example, “construction contractors,” medical professionals and commissioned salespersons.

Specifically, the law would require written contracts for the independent contractor's services that specify certain terms, such as contact information, itemization and valuation of all services, and the rate of compensation.

The law would also require that payment be made as specified by the contract, and would impose a default payment term of 30 days if the contract does not specify other payment terms. In addition, a business would be prohibited from attempting to negotiate costs after services are rendered “as a condition of timely payment.”

Significantly, freelance workers may also bring an action to enforce their rights (to payment, for example) through administrative action by the New York State Department of Labor. The Commissioner of Labor would then be required to investigate the claims as “wage claims.”  If the worker brought a civil action, he/she could recover double the amount of any alleged underpayment, attorneys’ fees, costs, and other remedies, as well as $250 in damages for failure to provide the worker with a written contract.

​The Bottom Line: Business owners using "freelance workers" or "independent contractors" are well-advised to remain vigilant and keep abreast of this trend to protect such workers. Of course, as I have said many times before, the first question to ask is: whether the worker has been properly classified as an independent contractor or is really an employee in disguise!