Hiring parties should review their current independent contractor agreements to ensure compliance with the adopted rules.
The New York City Department of Consumer Affairs (DCA) has adopted Final Rules (the Rules), effective July 24, implementing the Freelance Isn’t Free Act (the Act). The DCA states that the Rules are intended to “clarify” provisions in the Act, implement the goals of the Act, and provide guidance to hiring parties and freelance workers—though they appear to go further.
The Act, which went into effect on May 15, 2017, imposes a number of requirements that must be embodied in covered contracts and provides new causes of action for aggrieved contractors. The Rules have provided more specific requirements for covered contracts, most notably a sweeping prohibition on waivers of rights in contracts. Companies and individuals should review any contracts with independent contractors in New York City to assess compliance with the Rules in advance of their effective date.
Perhaps most critically, the Rules purport to greatly limit which rights a freelance worker can effectively waive in a contract. The Act provides that any provision in a contract waiving rights under the Act would be void. The Rules have gone significantly further, adopting the position that the following waivers will be considered void:
With respect to the waiver of class actions and the apparent bar on arbitration provisions, there are serious questions regarding whether the DCA is authorized to promulgate those provisions of the Rules, as they are not specifically authorized by the Act and, to the extent they purport to void arbitration provisions, may be preempted by the Federal Arbitration Act.
In advance of the July 24, 2017 effective date, hiring parties should take a proactive approach in reviewing their existing agreements and policies for compliance with the Rules. In particular, hiring parties should scrutinize any class action waivers or mandatory arbitration provisions, as well as any other provisions purporting to waive procedural rights.
In reviewing contracts for compliance with the Act, contracting parties must also be careful to balance the countervailing tension of employee classification laws. For instance, in specifying the required itemization of services to be performed, the contract should address the results of the services to be performed rather than the manner and means by which the services will be performed, in order to reduce concerns that the hiring party is directing and controlling the services in question.
Morgan Lewis will provide further guidance as the Rules are interpreted.
If you have any questions or would like more information on the issues discussed in this LawFlash, please contact any of the following Morgan Lewis lawyers:
Richard G. Rosenblatt