As we previously reported, the New York City “Freelance Isn’t Free” Act (the Act) took effect on May 15, 2017. The Act requires virtually all entities that engage an independent contractor in NYC for $800 or more in services to execute a written agreement with the contractor before work begins.  The Act additionally bars wage theft and retaliation against contractors, and imposes substantial penalties on businesses that fail to comply with its nuanced requirements.

As part of the Act’s implementation, the NYC Department of Consumer Affairs, the agency tasked with enforcing the new law, recently issued rules (the Rules) clarifying the Act’s provisions. Specifically, the Rules:

  • Invalidate contractual provisions that purport to waive or limit an independent contractor’s right to participate in or receive relief from a collective or class action – thereby preventing employers from using collective/class action waivers in independent contractor agreements – or to disclose the terms of the contract at issue to the NYC Office of Labor Standards

  • Void any contractual provision that attempts to waive or limit, as it relates to a freelancer, any procedural right normally afforded to a party in a civil or administrative action. This Rule appears intended to, at the very least, invalidate mandatory arbitration provisions in independent contractor agreements.
  • Explain that an independent contractor may establish a causal link between protected activity under the Act and a subsequent adverse action by a hiring party, either (i) circumstantially, such as with evidence that the protected activity was followed closely by the adverse action, or (ii) directly, with evidence of an intention by a hiring party to retaliate against a freelance worker
  • Explain that retaliation under the Act may be proved if the contractor can show that his/her attempt to exercise his/her rights under the Act was a “motivating factor” for a subsequent adverse action, even if other factors also motivated the adverse action. In other words, a “but for” causation standard, which typically applies to federal law retaliation claims, does not apply under the Act.
  • Define “adverse action,” for purposes of the Act’s anti-retaliation provision, broadly to mean any action by a hiring party that would constitute a threat, intimidation, discipline, harassment, denial of a work opportunity, or discrimination, or any other act that penalizes or is reasonably likely to deter a freelance worker from exercising any right guaranteed under the Act
  • Clarify that the provisions of the Act apply without regard to immigration status

The Rules, which were originally proposed on May 1, 2017, are set to take effect on July 24, 2017.

Practical Considerations

All NYC employers currently updating their independent contractor agreements and protocols in accordance with the Act should pay particular attention to the Rules. Perhaps most notably, NYC businesses should ensure that any future independent contractor agreements are free from the contractual waivers and limitations prohibited by the Rules (as identified in the first two bullet points above).  Otherwise, the threat of steep penalties might become a reality.

Danielle DelGrosso, a Reed Smith Summer Associate, contributed to this post.