On 05/15/17, the Freelance Isn’t Free Act (“FIFA”) takes effect in New York City, intending to give freelance workers additional protections from non-paying clients. This is a well-intended act that is based on misunderstandings and misinformation about who is a small business owner and what their duties are. Of course, I want to see freelancers, self-employed people, and micro-businesses get paid for their work. I am a self-employed, freelance attorney who owns and operates a microbusiness registered and doing business as The Law Studio of Nance L. Schick. Notably, I am exempt from FIFA protections, as are doctors, but that is not one of the reasons I don’t like the law.
Like many freelancers, I spent far too much time begging a large, well-funded client for payment. This client gave me so much business that I couldn’t focus far beyond its work, which I again wasn’t getting paid timely for. It was awful. I had to break my rule against credit card debt, often to pay for travel to do this client’s work, and I feared I might bankrupt my 13-year-old business. I had to borrow money for groceries, and the worst was when I had to tell my loved ones there was no money for holiday gifts.
That is behind me now, in part because I recognize that it is my responsibility to resolve these conflicts. I am a business owner, and I assumed the risks accordingly. (Admittedly, sometimes I hate that.)
This is the first issue I have with the FIFA. The Freelancers Union, which does a lot of great work for self-employed people, seems to be confused about what freelancer is, and now the City of New York is more confused than ever. Here are the other reasons I don’t like the FIFA:
- It requires clients to draft contracts for work to be done by an expert with more knowledge of the tasks required. When clients come to me, I don’t expect them to tell me what they want done, how it will be done, how long it will take, how much it should cost, how they will pay me, or when payment is due. They don’t typically have sufficient knowledge about the legal process as it applies to their cases, so we discuss them, and I draft the agreement. Likewise, when I have hired website designers, search engine optimization experts, editors for my book and blog, or bookkeepers, they used their superior expertise to guide me through the terms of our agreement. They drafted the contracts, and I signed them, indicating my consent. The FIFA requires the opposite. Now, I am required to know what my vendors require to perform their services. I am now very reluctant to hire any outside workers and will probably either do the work myself or train one of my current employees to do it.
- It seems to create a new category of worker: “misclassified with consent”. As described above, true freelancers are typically experts in their respective fields. They are not new graduates who are having a difficult time finding jobs and are simply doing side work to get by for now. They are not former employees who have been hired back in to do the same work for their former employers that they did before their department was eliminated. There’s a good chance that the freelancers the FIFA intends to protect are misclassified workers who don’t mind being misclassified, as long as they are getting paid. Rather than address the huge worker misclassification issues we have in NYC, the FIFA lures freelancers and their clients into thinking they can circumvent other laws by consent. This is grossly misleading, as the DOL, WCB, and other agencies are highly unlikely to waive their penalties, when the misclassifications are eventually discovered. There is no “worker misclassified with consent”, even if the FIFA tries to create one.
- It effectively redefines self-employment and places employer-like burdens on freelancers’ clients. Under the FIFA, clients are required to pay freelancers in full on or before the date the contract requires payment. There is no provision for resolving performance issues, which is common in services contracts. Instead, the FIFA appears to require payment for services, even if the work is unsatisfactory. This is far too similar to employment, where your employees get paid for the hours worked, even if they are underperforming (at least until you follow your disciplinary procedures up to and including termination). It gets worse. You’re required to know what the work will require, and you must draft the contract, despite your lack of expertise in the subject area. But if the work product isn’t what you wanted, you still have to pay what you agreed to under the contract, unless you can get the freelancer (who now has greater rights than you) to agree to corrections for the same costs, and be careful how you handle any disputes because the FIFA also has an anti-retaliation provision. It just might not be worth it to hire a freelancer in NYC anymore, because you–the client–are presumed to be an abusive employer [sic].
I agree with Freelancers Union CEO Sara Horowitz that the gig economy is not going away. It has been here for decades, and many existing laws already address it quite well, when applied:
- Black Car Operators Injury Compensation Fund
- Construction Industry Fair Play Act
- Contract Law
- Domestic Workers Bill of Rights
- Fair Labor Standards Act
- General Business Law
- Internal Revenue Code
- Internal Revenue Service’s Consistency and Rational Basis Tests
- Other Labor and Employment Laws
- Wage Theft Prevention Act
- Workers Compensation Law
We didn’t actually need another new law to make compliance even more difficult for small business owners (which are often the ones who hire freelancers). We needed to enforce the current laws more consistently. Ensure freelancers are properly classified by those who hire them. Crack down on the businesses who fire all of their workers in a department and bring them all back as “independent contractors”. Do more outreach and help the employers who made honest mistakes to correct them without more bankruptcy-inducing penalties. What a lot of freelancers don’t realize is that they are at risk of FIFA penalties when they subcontract work to other freelancers. This could get ugly fast.
NOTE: This post is a general overview of the new FIFA and how we think it will affect businesses, especially small businesses like the freelancers it seeks to protect. This post is not legal advice, and there is certainly no guarantee that actions taken because of the discussion above will generate a specific result. Past success is never a guarantee of a future outcome. If you require information or advice applied to your unique situation, please make an appointment to discuss it with an attorney. Don’t rely solely on what you read on the Internet.