The U.S. Department of Labor (DOL) has issued a Final Rule on the standards for determining independent contractor status for purposes of minimum wage and overtime pay issues under the Fair Labor Standards Act (FLSA). Although the Final Rule is considered “new,” it is based on the standard that was applied prior to the 2021 enactment of the Trump Administration’s rule, which had relaxed the standard for classifying workers as independent contractors, but also provided greater certainty to employers. The Final Rule reinstates the so-called “economic realities” test, which is generally more likely to result in a finding that a worker is an “employee.” Read on for more information in this blog post.
Employers’ engagement of independent contractors has increased substantially in recent years. Short-term projects and the gig economy have fueled the need for workers, who are not looking (or are unable) to find permanent employment, but otherwise possess critical skills or talents desired by start-up and well-established companies. In light of this reality, New York City enacted the “Freelance Isn’t Free Act” (FIFA), which took effect on May 15, 2017. FIFA applies to all engagements between the “hiring party” and independent contractor that have a value of $800 or more.
FIFA mandates a written agreement between the parties setting forth, among other things, the services to be provided as well as the rate and method of payment. In addition, it requires that compensation for services be paid no later than 30 days after the completion of such services if the agreement fails to specify when payment is due. FIFA prohibits a hiring party from conditioning timely payment on the freelance worker’s agreement to accept less compensation than the amount the parties agreed to prior to the commencement of services. A hiring party is barred from retaliating against a worker for “exercising or attempting to exercise any right guaranteed” under FIFA. In addition to preventing the harassment, discipline or denial of a work opportunity as retaliation, FIFA prohibits the hiring party from denying a “future work opportunity” to a worker who has engaged in protected activity.
A claim for violating FIFA may be filed with the newly created Office of Labor Standards or by filing a civil action within the appropriate statute of limitations. A lawsuit for unlawful payment practices or retaliation must be brought within 6 years, while a claim for failing to provide a written contract in accordance with the law is subject to a 2 year limitations period. In a civil action alleging that the hiring party failed to provide a written contract, the worker must allege that he or she actually requested a written contract before the work began. FIFA provides for the recovery of reasonable attorneys’ fees and costs, statutory damages of $250, an amount equal to the value of the underlying agreement, double damages, and injunctive relief for unlawful payment practices.