New York City has become the first U.S. city to adopt a law requiring NYC-based freelancers be paid in full for work worth $800 or more within 30 days of completing a project. NYC-based businesses that don’t pay on time face a possible lawsuit and civil penalties up to $25,000.
The Freelance Isn’t Free Act went into effect this week, after a unanimous city council vote. The act is designed to protect freelancers from unscrupulous employers who delay or completely withhold payment. As many as a third of New Yorkers — writers, artists, musicians, wedding planners, home healthcare workers, stage technicians, dog walkers — are protected by this law, but it may have several unintended consequences for New York business owners.
This is a union-based bill that uses legal fees as a sword to make employers pay for services that may be defective, but are too afraid to contest. It’s like settling a lawsuit for a lesser amount just so you don’t have to pay legal fees, even though you know you’re right.
The problem is employers are not protected if their freelancers turn in poor quality work. The freelancer only needs to say they completed the task by their deadline, no matter the quality, and then demand payment after 30 days, or on a previously agreed upon written date.
The freelancer would reach out to the city’s Office of Labor Standards, which will send a certified letter to the employer explaining the freelancer’s breach of contract. If payment isn’t made, the freelancer can take the employer to court and sue for double damages and attorney’s’ fees. The City can also seek to recover civil penalties up to $25,000.
One issue for freelancers is that they don’t always have the money to hire an attorney, so the Freelancers Union has launched their own mobile app to connect workers and attorneys who specialize in small claims, and are interested in pursuing these kinds of cases.
The biggest downside for employers is that the law still requires payment for freelancers who do a poor job. Even if you’re not pleased with the work, and can demonstrate how it doesn’t meet your standards, you may still face the cost of defending yourself against a lawsuit. On top of that, if you lose, you face paying double fees, plus the freelancer’s attorney fees.
On the upside, it can be a money-saver when hiring certain freelancers. A freelancer who lives in, say, the Midwest doesn’t have as high a cost of living as a New York freelancer. In a city like Indianapolis, Nashville, Cincinnati, or Minneapolis, housing costs less than $2,000 per month, and freelancers often charge accordingly.
Another option is to hire freelancers from overseas. You can find graphic designers, mobile developers, web designers, and tech support professional doing quality work in different parts of the world. The rates are much lower, but in some cases, may require some additional troubleshooting, editing, or massaging before the work is finally complete.
The most important thing when working with any kind of freelancer or independent contractor is that you have a contract that spells out exactly the kind and quality of work you want to be done, as well as what constitutes a completed project.
This bill may end up hurting New York freelancers in the long run, as more and more businesses work with freelancers outside the city and even the country. But until then, New York City businesses can protect themselves by finding their talent outside the city.