Imagine: You go out for dinner at a fancy downtown restaurant. At the end of the meal, your waitress delivers the bill to your table. You look it over, call your waitress over, and inform her that you will be paying no more than 70 percent of the total amount, and that the restaurant can expect your payment sometime in the next 90 to 120 days. You exit the establishment and carry on with your evening, while evidence of any immediate consequences for the stunt you just pulled remains effectively nonexistent.
Sounds crazy, right?
Unfortunately, for many freelance and contract workers, that scenario is all too familiar.
A freelance worker is defined as an individual who has engaged in supplemental, temporary, project- or contract-based work within the past twelve months. By this definition, survey data reported by the Freelancer’s Union indicates that approximately 53 million people—or 34 percent of the US workforce—qualify as freelance workers.
Traditionally, the freelance market is highly unregulated. What freelance workers gain in schedule flexibility and freedom from traditional nine-to-five corporate culture, they sacrifice in job security, benefits, and general wage protections. But new citywide legislation passed by the New York City Council is aimed toward improving that precarious status quo.
On October 27, 2016, the New York City Council approved a bill titled “Establishing Protections For Freelance Workers,” also known as the Freelance Isn’t Free Act. On November 16, 2016, New York City Mayor Bill de Blasio signed the bill into law, touting it as the first in the nation designed to protect wage payment rights of freelance workers. The law finally went into effect on May 15, 2017, and one group that felt it had particular cause for celebration of the new law was the Brooklyn Chamber of Commerce.
In New York City, the total number of freelance workers is just shy of four million. According to Andrew Hohn, President and CEO of the Brooklyn Chamber of Commerce, roughly 33,000 of those independent workers live in Brooklyn, and they are a vital part of the local economy.
Which is why the Brooklyn Chamber of Commerce has gone to great lengths to meet the needs of that particular sector of the economy. “We realized that even though the independent worker is, by themselves, just a single person with a business, when you look at them in aggregate, it’s a serious economic force,” Hohn said. “And it’s growing.” In response to that growth, the Brooklyn Chamber of Commerce introduced a freelance membership rate in order to provide all of the benefits of a chamber membership, but on a scale (and at a price) designed more specifically for the independent worker.
It’s certainly a unique approach—as Hohn noted, “No one that we know of is really focusing on the sole proprietor”—but it’s been well-received by the Brooklyn community, and the Brooklyn Chamber of Commerce’s freelance membership rate has been growing steadily ever since the membership package was introduced last year.
Which brings us back to the Freelance Isn’t Free Act: of the nearly four million freelance workers in New York City, more than seventy percent have reported problems with receiving payment from employers for completed work. Hohn said that for him and his chamber, it was naturally synergistic to join forces with the New York City Council delegation in order to pass some form of wage protection for freelance workers. Why did they make this their goal? According to Hohn, “Because it’s the right thing to do.”
The Freelance Isn’t Free Act imposes three specific requirements on New York City companies that contract with freelance workers. Those requirements are:
1. A written contract if the freelancer’s services are valued at $800 or more. (This $800 can be an aggregate total value of small projects completed within a 120-day period.)
2. Payment must be made in full, and in a timely manner (i.e., either on or before the date specified in the contract; if no payment date is specified, then compensation is due no later than 30 days after the freelancer’s completion of the contracted work).
3. Prohibition of any type of retaliation or adverse action on the part of the employee against the freelance worker should the worker chose to exercise the rights afforded to them by the Freelance Isn’t Free Act.
If an employer violates the law, the resulting damages they would have to pay vary based on the nature of the violation; statutory damages start at $250 and increase from there. Evidence of repeated violations of the law may even result in a civil action brought by the New York City Corporation Counsel, on behalf of the City of New York, to recover a penalty of up to $25,000.
To the average freelance worker, these protections are a huge deal. That’s because, without a law like this, a freelance worker who doesn’t get paid has essentially no method of recourse or way of efficiently and effectively recovering the money that’s owed to them. Think about it: many freelancers count on repeat clients in order to keep their business portfolio as robust as possible. Taking a more aggressive, interpersonal approach—perhaps by threatening to sue, or by threatening to “expose” a client for their shady business dealings—could mean no more work from a much-needed revenue source. Because, let’s face it, even for those among the 70 percent of freelancers who have struggled to collect payment for completed work, there remains the hope that if they keep working for the client, eventually the client will make good on their payment.
Or, even if the relationship with the troublesome client is not one that the worker counts on in order to make financial ends meet, there still exists the fear that a well-connected client might bad-mouth a freelancer who too aggressively pursues the money that they’re owed. That could mean a smaller revenue stream down the line, as potential clients opt for contract workers who don’t have a reputation for being quite as “difficult.” Oh, and forget taking a delinquent client to small claims court: by the time that process is over with, the worker is likely to have spent more in legal fees than whatever payment amount it is they’re hoping to get from their client.
As is so often the case when dealing with small businesses, however, what’s good for those businesses often proves to be good for the local economy as well. As Hohn pointed out, having a law like the Freelance Isn’t Free Act on the books in New York City (and, by extension, Brooklyn) “will help to foster an ecosystem in Brooklyn that encourages, welcomes, and helps freelancers grow [and] thrive.”
In an article published by Mondo, a tech-centric staffing agency, Shannon Vize offers four additional examples of how protections for freelance workers benefit employers and the greater economy. First, at the most basic level, having a law that requires a contractual agreement between employer and freelancer helps to minimize stress: it ensures that both parties are protected and satisfied with the terms of the agreement right from the outset, and the clear outline of a payment plan reduces the likelihood of an awkward or negative wages negotiation. Second, it increases productivity and reliability: if a freelancer enters into an employee/client relationship not knowing exactly when or if they’re ever even going to get paid, do you really think you’re going to get their absolute best work? You might, but chances are, an worker who’s unsure about how they’re going to be compensated is not going to produce work as promptly or as high-quality as a worker who has complete confidence in the financial terms of their work agreement.
Further, at a company-wide level, having protections for freelance workers can improve company culture. Let’s face it: most people are way less enthusiastic about working for an employer who has a reputation for treating freelancers poorly, or for stiffing contract workers. By treating freelance employees well, not only can a business expect to have a more loyal base of freelance workers, but it can also expect a higher retention rate among its full-time employees, as many would much prefer to work for a company with a positive reputation in the business community than one with a reputation for not making good on payments.
Finally, protection of freelance workers is good for the local economy as a whole because it attracts talent to the area. According to Hohn, New York City is outpacing the rest of the state in job growth in the “project-based economy.” That growth will likely only continue now that the Freelance Isn’t Free Act has taken effect, simply because workers will want to go work in places where their wages are legally protected.
Because the Freelance Isn’t Free Act is the first law of its kind to be enacted in the United States, it remains to be seen exactly what effect it will have on the local economy. However, growing talent gaps in a number of sectors—particularly in tech- and design-related fields—means that more and more businesses are turning to the shared economy and the use of contract workers in order to meet their needs. New York City in particular, Hohn explained, is seeing growth in the shared economy, as businesses realize “that you don’t need to hire a full-time graphic designer [for example], because, among five businesses, you could share a graphic designer, which is really what the independent worker movement is all about.”
And, as Hohn also pointed out, the growth in the independent worker movement is not limited to New York City alone; it’s happening all over the country. In light of that growth, it seems probable that if the Freelance Isn’t Free Act yields positive returns for the New York City economy, other cities will work to pass similar legislation in order to become more competitive in attracting top freelance talent.