It’s a nearly universal worry for freelancers. What can you do if your client refuses to pay? Or underpays?
Fortunately, freelancers in New York City have the Freelance Isn’t Free Act, which guarantees timely payment.
Between 2011 and 2015, New York City’s specialized independent workers earned $103 billion. These freelancers, including programmers, graphic designers, writers, and consultants, lose nearly $6,000 a year each because of non-payment.
For the 533,000 specialized freelancers in New York, that adds up to over $3 billion in lost wages annually. The Freelance Isn’t Free Act helps New York City freelancers get paid, but many freelancers don’t know how to access the Act’s protections.
How to ensure you’re protected by the Freelance Isn’t Free Act
The Freelance Isn’t Free Act grants the strongest payment guarantees in the nation for freelancers. Under the Act, freelancers can file a lawsuit if their client doesn’t fully pay their contract on time. If, for example, a client refuses to pay a freelancer’s $10,000 contract, the freelancer can file a lawsuit to recover $20,000: $10,000 for the original contract plus $10,000 in damages. The law applies to freelancers who contract to complete $800 or more of work for a client within a 120 day period.
Under the Freelance Isn’t Free Act, hiring parties must provide a written contract to freelancers. To comply with the requirements, the contract should include:
- the name and mailing address for both the client and the freelancer
- an itemized list of services the freelancer will provide with the value of those services
- a description of the rate and method of compensation
- the date the freelancer will receive payment. (If the contract does not list a date, the freelancer must be paid within 30 days of completing the terms of the contract.)
New York City offers a sample freelance contract that complies with the law’s requirements. If a hiring party does not provide a valid contract, the freelancer can file a claim for $250.
What are the damages clients can pay under the Freelance Isn’t Free Act?
Here’s what makes the Freelance Isn’t Free Act critical for freelancers: the damage provisions for underpayment, non-payment, and late payment. Under the Act, freelancers receive double damages if the client fails to pay any part of the contract amount or pays late.
For example, if a client pays $2,500 of a $5,000 contract two days late, the freelancer is owed an additional $2,500 as a penalty. If a client underpaid by $5,000, the freelancer can receive the $5,000 owed plus $5,000 in damages.
The damages grow even higher for freelancers without a valid contract. If the client doesn’t provide a valid written contract and pays a little late or a little short, the client must pay the entire contract value as a penalty in addition to what they still owe the freelancer. Thus, if the entire contract was worth $25,000, as in a recent case I handled for a writer, and one installment was late, the client must pay the freelancer $25,000 in damages in addition to the $25,000 already paid. Another freelancer was shorted $11,000 and we recovered $60,000.
In short, the Act guarantees that freelancers get paid for their work. If they don’t, the client can be severely penalized.
The Freelance Isn’t Free Act includes strong retaliation provisions as well. These protect freelancers from retaliation or harassment if they file a claim under the Act. For instance, retaliation can mean a client threatening a freelancer, attempting to blacklist the freelancer, or leaving bad reviews to discourage the freelancer from pursuing payment.
Freelancers receive double damages for every instance of retaliation. Take one example: a freelancer files a claim for non-payment on a $10,000 contract and the client retaliates by threatening to write a negative review and tell people not to hire the freelancer. Both qualify as acts of retaliation. The freelancer can receive the original $10,000, an additional $10,000 in damages, and $20,000 for two instances of retaliation, for a total of $40,000.
The Freelance Isn’t Free Act went into effect on May 15, 2017; freelancers can use the Act to enforce payment on qualifying contracts signed after that date. The Act does include a statute of limitations for bringing claims. Freelancers filing for unlawful payment practices or retaliation have six years to file a claim in court and two years for claims for failure to provide a valid written contract, though the law does not apply to contracts from before May 15, 2017.
How can freelancers get paid with the Freelance Isn’t Free Act?
One way is to file a claim with the NYC Office of Labor Policies and Standards (OLPS), which will notify the client. If the client does not respond within 20 days, the freelancer can file a lawsuit with the presumption that the client violated the Act.
However, OLPS cannot file a lawsuit or award damages to freelancers. Instead, to recover damages, freelancers must go to court. A judge will review the case, including any material gathered by the OLPS, and rule on the damages.
A New York employment lawyer can help freelancers navigate the process, from filing an OLPS claim to proceeding to court. With a lawyer’s guidance, freelancers can also build the strongest case and maximize their damages.
Because it’s a relatively new law, there are still open questions about the scope of the Freelance Isn’t Free Act. For example, the law does not clearly set geographic requirements for filing claims. Freelancers who work in New York City and freelancers who work for companies in New York City may both qualify. The lack of case law also makes it worthwhile for freelancers to reach out to an employment lawyer for guidance.