NY City vs. New York State: What Startups Should Know When Contracting Freelancers

Over two years ago, in New York City, the Freelance Isn’t Free Act (FIFA) went into effect, giving freelancers in NYC a number of important protections.

FIFA gives freelancers and independent contractors legal safeguards from late payments, from working without contracts, and other protections, including government agency support to pursue overdue invoices, that they hadn’t previously benefited from.

Outside of New York City, freelancers in New York State are still waiting for similar protections. Legislative action at the state level hasn't been as proactive as in New York City. In December 2018, Governor Andrew Cuomo announced in his speech outlining his first 100 days of his third term, new legal safeguards for freelancers and so-called ‘gig economy’ workers.

In a speech at the Roosevelt Institute in Manhattan, Governor Cuomo said: “Gig jobs do not come with paid sick leave, they do not come with vacation days, or parental rights, or workers' compensation, or protection against work related discrimination, or protections against wage and hour violations. We want an economy that moves forward. We want an economy of tomorrow. But we want an economy that moves everyone forward, not just some forward.”

What this means for freelancers and startups?

In short, so far, nothing concrete has moved forward in Albany. It was the only legislative agenda item that didn't come with concrete proposals in the January State of the State speech, or finalized state budget agreed in the legislature in March 2019.

However, this doesn't mean that freelancers in New York State, or freelancers working for companies based outside of New York City, have been forgotten. In January, a spokesperson for the Governor gave a statement to Gotham Gazette, saying that the administration was “exploring whether we need new rules to help protect impacted workers or whether the Department of Labor can issue regulations.”

At present, the New York State Department of Labor provides clear guidance about how companies should work with freelancers and whether someone is classified as a contractor/freelancer or an employee. Companies failing to adhere to these guidelines, such as intentionally or accidentally misclassifying someone as an independent contractor instead of an employee could still find themselves in trouble with the IRS. (We will cover more on this topic in an article next month.)

Within the boundaries of the five Boroughs, FIFA is working. According to data from the NYC Department of Consumer Affairs - tasked with enforcing the law, 764 official complaints have been filed, resulting in $978,928.66 worth of overdue invoices being paid to freelancers, so far.

Does FIFA protect freelancers located in New York City who are working for clients in New York State?

Freelancers often work for clients in different parts of the same state, or another state, and even other countries. For freelancers working in New York City for companies located outside of the City, the law doesn't necessarily offer the same protections.

If, for example, a client is based outside of NYC and most of their business is conducted outside of the City, FIFA is unlikely to afford a freelancer any protection unless the contract specifies that the freelancer is located in NYC and is performing the services in NYC.

On the other hand, if a client is based outside of NYC, yet the majority of their business is conducted in the City, a freelancer could seek protections by filing a complaint with the the Office of Labor Policy and Standards (OLPS).

As the Freelancers Union states: “Ultimately, jurisdiction is up to the court to decide.” Concerned freelancers should put a jurisdiction clause into the contract, specifying that any legal actions taken are subject to New York State and New York City laws, and must be reviewed by courts located in New York City. This way, the choice of law is NYC, regardless of the client’s location.

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Disclaimer: This article constitutes attorney advertising. Prior results do not guarantee a similar outcome. MGLS publishes this article for information purposes only. Nothing within is intended as legal advice.