Mandatory written contract for all projects in which a freelancer is paid $800 or more within a 4 month period
The contract must contain the following details:
Name & Mailing Address of The Parties
Itemized Listing Of All Services Contracted For
Value of Services To Be Provided
The Rate & Method of Compensation
The Date In Which The Hiring Party Must Pay The Contracted Amount or The Mechanism By Which Such Date Will Be Determined
If a payment date is not provided the contractor must be paid within 30 days of completion of services
Who Does The Law Cover
In the law, freelancers are defined as any natural person or any organization composed of no more than one natural person, whether or not incorporated or employing a trade name, that is hired or retained as an independent contractor by a hiring party to provide services in exchange for compensation. This includes:
Freelancers Earning 1099 Income
Sole Proprietors who are:
are incorporated as an LLC, S-Corp or C-Corp and do not have employees
Who The Law Does Not Cover
The law does not cover the following:
Freelance Sales People
Businesses With Employees
Freelancers Earning W-2 Income
What Happens If I Am Not Compliant
There are three types of violations companies could incur if they do not comply with the new law.
Violation of the written contract requirements
Violation of the payment requirements
Violation of the anti-retaliation provision
In a case of a violation, the freelancers alleging violations can file with the New York Department of Labor or go straight to court. Clients cannot retaliate against freelancer for pursuing payment.
If the hiring company violates the written contract requirements, the company would be fined $250 per occurrence. If the hiring party violates the payment requirements and/or anti-retaliation provision, the company would be responsible for the full value of the contract, attorney fees & cost and double damages. If New York City sees a pattern of violations, this could result in a civil penalty of $25,000.
What Should I Do Next
Staying compliant with the law is extremely important. Consult with your company's legal counsel and review the law in full to make sure the contracts you use for freelancers are revised and up to date. If you are not using contracts on a per project basis, you should implement this process right away and outline how you will create, distribute, execute and store your contracts. More states are passing similar bills so contracting on a per project basis will become more of a common practice for freelancers.
If you’re looking to be compliant with state & federal laws, automate your contracting and payment process to freelancers, then contact our industry experts today to see how Mertzcrew’s Crew Management Platform can make you compliant without interrupting your current business.