When a client doesn’t pay you for freelance services, your main recourse is to claim breach of contract. But now, one city is taking steps to help freelancers get paid.
The “Freelance Isn’t Free Act”
New York City just passed the first law that expressly protects the right of freelancers to get paid. The law goes into effect in May 2017 and, in short, creates penalties for businesses that fail to timely pay a freelancer.
What the law says
According to the new law:
- When a freelance project is worth more than $800 in a four-month period, the client must provide a written contract to the freelancer if the freelancer requests one (although we usually recommend freelancers use their own client agreement when working with a client – read more).
- The contract must contain, at a minimum, (a) identification and contact info for the parties; (b) an itemized list of services; (c) the value of those services; (d) the method of payment; and (e) a due date for the payment.
- The client must pay the freelancer on or before the due date or, if the due date is based on when services are completed, within 30 days of the completion of the services.
- The client cannot require the freelancer to lower their rate for a specific project once work has started.
What this means for freelancers
This new law gives a lot of power to a freelancer that is stiffed by a client. Specifically, they can file a complaint with the newly created New York City Office of Labor Standards who will require the client respond to formal notices (and thus speed up the dispute resolution process).
Perhaps most importantly, the law:
- Requires the client pay for services rendered.
- In some situations doubles the payment amount.
- Provides for statutory damages.
- Requires the client pay the freelancer’s legal fees if the freelancer wins their claim.
- Prohibits the client from taking any anti-retaliation actions against a freelancer who enforces their rights under the law.
- Allows the city to fine repeat offenders $25,000.
What this means for businesses hiring freelancers
In my opinion, this is simple. Businesses should always use written contracts with freelancers for a number of reasons.
- First, it forces the parties to thoroughly think through what the freelancer is being hired to do and also what, how, and when, the client must pay.
- Second, if forces the parties to think through various “what if” scenarios and address what should happen in those scenarios.
- Third, without a written contract addressing ownership of intellectual property, the business might not be getting what it thinks it is getting (ie, the freelancer may end up owning the IP created under the contract).
What this means for Kansas City Freelancers
Unfortunately, not much. This law is specific to New York City. But my recommendation is for Kansas City freelancers to pay close attention to how this law impacts the freelance community in New York City. My guess is it will be very beneficial for freelancers and also somewhat beneficial to clients. However, I’m also slightly concerned about whether it goes too far and might be unfair in some situations when a freelancer doesn’t fully perform and they file a complaint anyway.
But those kinks will be worked out and, maybe in the future we can enact something similar in Kansas City or at the state level in Missouri and/or Kansas.
Next Steps for Both Freelancers & Clients
Don’t ignore this next step!
Find an attorney that works on freelance agreements on a regular basis and engage him or her to create a template library for you. Together, you can create templates that align with the way you run your business and can help you negotiate better project terms.
For more, you might check out our post on the Two Contracts Every Freelancer Needs.