A new law went into effect on May 15, 2017 called the Freelance Isn’t Free Act or FIFA (not to be confused with Federation Internationale de Football Association). It is the country’s first law that is designed to protect freelancers against non-payment.
While freelancers do not get benefits that are offered to employees, statistics show that about 70% of freelancers in New York reported some problem with receiving payment. This law applies to anyone who is hired as an independent contractor by a hiring party barring a government agency. Which means that if an individual is hired as a freelancer or independent contractor by a government agency, this Act will not apply.
As an attorney who represents startups, small business as well as freelancers, I have seen many disputes arising from a business owner and freelancer relationship. FIFA protects both parties to the transaction by ensuring that the hiring party is satisfied with the work provided by the freelancer and timely payment to the freelancer at the completion of a project. Here are some essential components of the FIFA:
- Any business hiring a freelancer in return for a compensation of $800 or more during a 6 month period will now be required to enter into a formal written agreement describing the scope of services, terms of payment, and a date certain on which the freelancer will be paid.
- In the event that the freelancer is not paid within the time prescribed in the written agreement, the hiring party will be in violation of the law. Under the Act, the freelancer will have recourse with the Dept. of Consumer Affairs or the small claims court or the state court to file a complaint against the hiring party in case of non-payment or if the hiring party does not enter into a written agreement.
- FIFA imposes strict monetary penalties against businesses violating the rights of freelancers with penalties going up to $25,000 for repeated violation of the law.
Businesses need to take inventory of their independent contractor relationships, have their contracts reviewed by an attorney, and ensure that they have independent contractor agreements for all freelancers hired by them if they are not already in place. Many business owners are not aware whether the person hired is a true independent contractor. A review and analysis of these relationships is crucial.