July 01, 2017

Paying Freelancers in New York

Freelance work comes with its risks, and one of the biggest is associated with the challenge of being paid (on time and fully). Just visit the site “The World’s Longest Invoice”  to get a visualization of the scope of this issue.  According to a survey, 71% of freelancers do not receive the amounts that they are due and on average chase payments of nearly $6,390 per freelancer. The tally of unpaid invoices totals almost $4.2 million. This risk is finally beginning to be addressed in New York City. New York City Local Law 140, also known as The Freelance Isn’t Free Act, recently passed and provides some protection for freelancers.

The Freelance Isn’t Free Act provides a detailed framework for how deals with freelancers are made, and provides remedies for when things don’t go as planned. This allows freelancers to do business with more confidence and fewer potential risks.  The new rules lay down the right of freelancers to:

  • A written contract, with the names and addresses of both parties, for agreements which total $800 or of duration over 120 days, with an itemized list of services, pay for the work with a due date for the payment
  • Payment in full and on time, or within 30 days after completing the services under the agreement, in the absence of a specific date for payment
  • Freedom from retaliation and a right to sue the hiring party to seek damages at double their unpaid dues along with legal expenses, as well as damages for failing to enter into a contract

The law establishes other complain mechanisms and remedies for any violations of a freelancer’s right to payment, and defines a freelancer as a natural person (or an organization composed of no more than one natural person), who is hired or retained as an independent contractor to offer services against compensation. Payment must be made on or before the date specified in the contract or before completing 30 days from the date of completion of the services contracted for. The hiring party may not reduce the payment, so as to pay the dues on date. The act also provides for damages, statutory damages, double damages, and injunctive relief depending on the violation with the penalties alone touching $25,000 for repeat offenders.

At least 500,000 New Yorkers, who file 1099-MISC tax forms as independent contractors, stand to benefit from this Act that will protect them from suffering financial hardships due to unpaid wages. These workers often face expenses such as office space, utilities, equipment, its maintenance, their own vendors, and other operating costs.

New York is the first city to establish such a law to protect the rights of freelancers to fair wages on time. It’s expected that more cities and states will follow suit.