Author: forework

NYC”s “Freelance Isn’t Free” Act Adds Additional Compliance Requirements for Employers Engaging Contractors in NYC

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New York City’s “Freelance Isn’t Free” Act emphasizes importance of compliance with independent contractor rules.

The New York City “Freelance Isn’t Free Act” (FIFA) took effect on May 15, 2017. The first of its kind in the country, FIFA was designed to protect independent contractors by imposing a number of strict requirements on individuals and entities that contract with freelance workers. FIFA establishes penalties for violating requirements including statutory damages, double damages, injunctive relief, and attorneys’ fees. Businesses covered by FIFA should familiarize themselves with its requirements.

FIFA’s Coverage

FIFA applies to a person who retains a freelance worker to provide any service. Excluded from coverage are the U.S. government, New York State (including agency, authority, or other body of the State), New York City, any local government (e.g., municipality or county), or any foreign government. FIFA refers to a person that engages a freelance worker as a “hiring party.”

FIFA governs the relationship of any hiring party with a freelance worker, which is defined to include “any natural person or any organization composed of no more than one natural person, whether or not incorporated or employing a trade name” engaged to provide services in exchange for compensation. The definition excludes commissioned salespersons, attorneys and licensed medical professionals.

FIFA’s Requirements

FIFA requires that any hiring party engaging a freelancer must enter into a written contract with the freelancer whenever the contract between them has a value of $800 or more (either by itself or when aggregated with all contracts for services between the same hiring party and the freelancer during the immediately preceding 120 days). Each party must retain a copy of the written contract, which must include, at a minimum, the following information:

  1. the name and mailing address of both parties;
  2. an itemization of services to be provided by the freelancer;
  3. the value of the service to be provided pursuant to the contract;
  4. the rate and method of compensation; and
  5. the date on which the hiring party must pay the contracted compensation to the freelancer or, if no date is provided, the mechanism by which such date will be determined.

Any person retaining a freelancer must pay the contracted compensation on or before the date such compensation is due under the contract. If the contract does not specify when the person must pay the contracted compensation, or the mechanism by which the date will be determined, then the freelancer must be paid no later than 30 days after the completion of their services under the contract. After a freelancer has commenced performance of services under the contract, FIFA prohibits the hiring party from requiring, as a condition of timely payment for services, that the freelancer accept less compensation than the amount of the contracted compensation.

FIFA places the burden of compliance on hiring parties. However, failure to comply with FIFA does not render any contract between a hiring party and a freelance worker void or voidable or otherwise impair any obligation, claim, or right related to such contract, and it does not constitute a defense to any action to enforce, or for breach of, such contract.

FIFA’s Anti-Retaliation Prohibitions

FIFA prohibits hiring parties from retaliating against freelancers. Specifically, hiring parties may not “threaten, intimidate, discipline, harass, deny a work opportunity to or discriminate against a freelance worker, or take any other action that penalizes a freelancer for, or is reasonably likely to deter a freelancer from, exercising or attempting to exercise any right guaranteed under this chapter, or from obtaining future work opportunity because the freelance worker has done so.”

Complaint Process

A plaintiff alleging a violation of FIFA may file a complaint for investigation with the Director of the New York City Office of Labor Standards (“OLS”), or a lawsuit in court. The statute of limitations to file a claim with OLS for violations of FIFA is two years, measured from the date of the alleged violation. For court actions, FIFA provides a two-year statute of limitations for bringing a claim alleging violations of the written contract requirement, and a six-year limitations period for bringing an action alleging failure to make timely or full payment or for retaliation. The Director of OLS will have no jurisdiction to investigate a claim that is also the subject of a court action alleging a violation of FIFA or a breach of contract claim that is pending in any court or administrative proceeding.

Statute of Limitations and Damages for Violations

A plaintiff who prevails on a claim alleging a violation of the written contract requirement will be awarded damages of $250. A plaintiff who prevails on a claim alleging a violation of the written contract requirement, as well as one other violation of FIFA, will receive damages equal to the value of the underlying contract plus other remedies under FIFA. A plaintiff who prevails on a claim alleging a violation of the timely payment requirements will receive double damages, injunctive relief, and other remedies as may be “appropriate.” Damages equal to the value of the contract are also available if the hiring party retaliates against a freelance worker for exercising, or attempting to exercise, any right under FIFA. If there is evidence of a pattern of repeated violations, the City of New York, through the Corporation Counsel, may bring a civil action to recover a civil penalty not to exceed $25,000. Prevailing parties will also be awarded reasonable attorneys’ fees and costs.

Assistance for Workers and Businesses

Pursuant to FIFA, the OLS will establish a “navigation program” that will provide information and assistance to individuals who have questions regarding FIFA. Under the navigation program, model contracts will be available to the general public at no cost, in English and six languages most commonly spoken by limited English proficient individuals in New York City. Further, the navigation program will provide information about procedures under FIFA, available templates and court forms, classifying workers as employees or independent contractors, and organizations that can be used for identification of attorneys.

Data Collection

Under FIFA, the OLS is directed to follow up with freelance workers who file complaints to determine whether the freelance workers commenced a court action to enforce their rights or entered into alternative dispute resolution proceeding with the hiring party, and whether the freelancer was paid any or all of the compensation due to the freelancer. The Director of OLS will collect and track information about complaints alleging violations of FIFA. OLS’s records will include, at a minimum, the identity of the hiring party alleged to have violated FIFA, the freelance worker’s occupation, the section of FIFA that was alleged to have been violated, the value of the contract, the response or non-response of the hiring party in OLS’s investigation, and information from a completed survey done by the freelance worker.

In view of the potential penalties for noncompliance, any person or entity engaging a freelance worker in New York City should evaluate its practices and independent contractor agreements to ensure compliance in connection with any contracts executed with freelance workers after May 15, 2017.

NY Employers Beware: You can be Personally Liable for Wage and Hour Errors

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The individual owners and operators of a business can be personally liable for wage and hour errors and underpayments to workers.

In a 2013 decision, the U.S. Court of Appeals for the Second Circuit sent a chilling reminder to business owners, executives, and other high-ranking employees that they may be held personally liable for their company’s violations of the Fair Labor Standards Act (FLSA). In Irizarry v. Catsimatidis, the court held that the CEO of a grocery chain—and a New York City mayoral candidate—was individually responsible for paying a $3.5 million settlement, which represented alleged unpaid overtime wages.

“Employers” may be personally liable for FLSA violations. But whether an individual is an “employer” under the FLSA is determined under a four-part “economic realities” test, which examines whether the alleged employer: 1) had the power to hire and fire the employees, 2) supervised and controlled employee work schedules or conditions of employment, 3) determined the rate and method of payment, and 4) maintained employment records. Ultimately, courts make these determinations on a case-by-case basis, examining the totality of the circumstances.

In Irizarry, the court concluded that the CEO exercised “operational control” of the company, making him an “employer” under the FLSA, and thus personally liable for the wage and hour settlement. In its decision, the court emphasized that the CEO worked in the corporate headquarters almost every day; handled the banking, real estate and financial matters for the business; was involved with product merchandising; responded to consumer complaints; made employment decisions, such as hiring and firing managerial employees; and visited the company stores to evaluate operations. The CEO’s arguments that he made general corporate decisions and was not involved in the day-to-day operations of the business were rejected by the court.

Irizarry did not establish any new law, but it highlights the importance of proactively assessing and reviewing a company’s wage and hour compliance. The case serves as an important reminder that corporate form does not preclude individual liability for FLSA violations.

New York City Updates Its Paid Safe & Sick Leave Law

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The New York State Paid Sick Leave Law (“NYPSL”) accrual provisions became effective today, September 30, 2020. Under the NYPSL, employees may begin using this NYPSL leave on January 1, 2021. Not to be outdone, on September 28, the New York City Council and Mayor DeBlasio amended the New York City Sick and Safe Time Law (the “NYC Law”) to account for the requirements of the NYPSL. While there are many similarities between the NYPSL and the NYC Law, there are some important distinctions that companies with employees in New York City should be aware of.

Summary of the NYC Law Amendments

The amendments to the NYC Law became effective today, September 30th, 2020.

The NYC amendments generally seek to align the pre-existing City leave law with the recently enacted State leave law, including by aligning the accrual and usage purposes, by expanding the amount of sick and safe leave employers with 100+ employees must provide from 40 hours to 56 hours annually, and by requiring some smaller employers (4 or fewer employees) to provide paid leave to employees if the employer had a net income of $1 million or more in the previous tax year. NYC employers that are now subject to expanded leave obligations under the NYPSL still have until January 1, 2021 to institute these expanded benefits.

There are also several important changes of which employers should take note:

Immediate Pay Statement & Notice Requirements

  • New York City employers are now required to note on employees’ pay statements (or via another written communication each pay period):
  • (i) the amount of sick and safe time accrued and used during the pay period; and
  • (ii) employees’ total balance of accrued sick and safe time.
  • Employers have until October 30th to notify employees of the changes in the NYC Law, and they must continue to provide new employees with a notice of rights under the NYC Law upon commencement of employment.

No More 80-Hour Threshold for Work in NYC

  • The new amendments remove the previous requirement that employees work 80 hours within New York City as a threshold for being eligible for the safe and sick leave under the NYC Law. Now, any employee that works in New York City, regardless of the number of hours, will be protected by the NYC Law.

Employers Now Responsible for Reimbursing Employees for Documentation Fees

  • Where employers require employees to submit medical documentation (after three consecutive days of sick and safe leave use), the new amendments require employers to reimburse employees for any fees associated with obtaining that documentation (e.g., fees charged by medical providers).

Redefining “Domestic Workers”

  • The amendments expand the definition of “domestic worker” to mean any “person who provides care for a child, companionship for a sick, convalescing or elderly person, housekeeping, or any other domestic service in a home or residence”). The NYC Law eliminates distinctions between the rights of domestic workers and regular employees. Now, any employer who employs even 1 domestic worker is subject to the NYC Law’s leave requirements.

Expanded Retaliation Provisions

  • The NYC Law amendments expand the list of prohibited retaliatory actions, including specific language prohibiting employers from maintaining any absence control policy that counts protected sick and safe time leave as an “absence” that could result in disciplinary measures.
  • The new amendments also clarify that the law’s anti-retaliation provisions are implicated when an employee’s protected activity (e.g., using leave under the law) is a motivating factor for an adverse employment action, even if other factors may also contribute to the decision.

Collectively, these changes will make it easier for employees to invoke the Department of Consumer Affairs’ jurisdiction against an employer who takes any adverse employment action related to or close in time to when an employee uses leave under the NYC Law.

Enforcement Changes

  • Under the amended NYC Law, the City’s Department of Consumer Affairs may now bring “pattern or practice” enforcement actions with expanded capabilities, including new subpoena and investigative powers. An employer found to have engaged in a “pattern or practice” of non-compliance could be subject to a maximum penalty of $15,000, with the potential for an extra $500 in damages for each employee who was not permitted to utilize safe and sick leave pursuant to the NYC Law.
  • Further, the amendments also clarify that the City may apply penalties to non-compliant employers for each employee. This could exponentially increase potential damages for employers.

As employers are updating their policies to reflect the NYPSL requirements, they should ensure that their policies reflect these new NYC Law requirements also. More importantly, to the extent employers’ pay stubs do not already reflect (1) the amount of sick and safe time accrued and used during a pay period; and (2) employees’ total balance of accrued sick and safe time, employers should work with their payroll provider to ensure these requirements are reflected on the paystubs. Lastly, given the increased enforcement and penalty provisions of the NYC Law, employers should ensure that their managers and coordinators are adequately trained to recognize and respond to requests for time off that are lodged by their employees.

Wage and Hour Issues in Inclement Weather

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With winter weather fast approaching and potentially forcing businesses to reduce or cease operations, employers are reexamining their federal and state wage and hour obligations to employees affected by weather-related office closures and reductions in work hours. This alert summarizes the key wage and hour rules implicated in such situations.

Overtime-Exempt Employees

Subject to certain exceptions, the Fair Labor Standards Act (FLSA) requires employers to pay exempt employees their full salary for any week in which an exempt employee performs any work. An employer may not make deductions from an exempt employee’s salary for absences caused by the employer or by the operating requirements of the business. If an exempt employee is ready, willing, and able to work, deductions from the employee’s salary may not be made when no work is available. Thus, if a business is closed three days in a single week due to inclement weather, but an exempt employee performs work for the business for the rest of the week, the employee must receive his or her full salary for that week; no deductions from the predetermined salary may be made for the three days that the business was closed. However, if an employer’s office is closed for the entire workweek and exempt employees perform no work that week, they do not need to be paid their regular salary for that week.

Employers may lawfully make deductions from exempt employees’ salary for full-day absences due to personal reasons, other than sickness or disability. Thus, for example, if an office is open for business but an employee is unable to get to work because he or she lives in an area that has been affected by heavy storms (a personal reason), the employer may make a deduction from the employee’s salary for a full day’s absence.

Generally, deductions from exempt employees’ salary for partial-day absences are prohibited. Therefore, an employer cannot reduce an exempt employees’ salary by half of a day if the employee only works half of a day (for example, if the employee shows up to work late due to bad weather) or leaves work early (for example, if the office closes earlier to allow employees to arrive home before a snow storm).

Exempt employees who are able to work remotely from home, even when their primary work location is closed due to weather-related problems, must be paid their full salary.

If an employer provides employees with paid time off, the employer may make deductions from exempt employees’ paid time off accounts for absences occasioned by weather-related business closures or reduced work hours. Such deductions may be made in any amount, including partial days. If the employee does not have any paid time off accrued, however, no deductions may be made from their salary for any week in which they performed any work.

Non-Exempt Employees

The compensation rules for inclement weather situations are somewhat different for non-exempt employees. Employers are not required to pay non-exempt employees’ wages for any days that non-exempt employees do not work. Therefore, if a business is closed due to inclement weather, and non-exempt employees do not perform any work for the business during the closure, the business has no obligation to pay its non-exempt employees for time not worked. Importantly, non-exempt employees who work from home must be compensated for any time worked, even though the business might have been closed due to weather conditions.

Other Considerations

Employers’ wage and hour obligations with respect to non-exempt employees might be affected by state wage and hour rules. In New York, the Labor Law “call-in pay” provisions state that an employee who, by request or permission, reports to work on any day shall be paid at least the lesser of: a) four hours at the basic minimum wage rate; or (b) the number of hours in the employee’s “regularly scheduled shift” at the basic minimum hourly rate. Call-in pay is due regardless of whether an employee is “called in” or simply reports for work as scheduled.

Thus, for example, if an employee reports to work at his or her regularly scheduled time and, upon arrival, learns that the business is closed for the day due to weather conditions, a call-in pay obligation is potentially triggered if the employer failed to notify the employee not to come to work. Importantly, for most employees, there is no obligation to pay call-in pay if the total wages paid to an employee in a workweek involving call-in pay exceed the amount that would have been paid to the employee had he or she been paid at the minimum wage for all hours worked that week, plus any call-in pay owed. However, employers covered by the Hospitality Wage Order are not exempt from the call-in pay requirements, regardless of their employees’ earnings.

And of course, unionized employers should consult any applicable collective bargaining agreement concerning wage and hour obligations during weather-related business closures or reductions in hours.

Improper Deductions or Reductions in Pay

If an employer discovers that it has made isolated improper deductions from an exempt employees’ salary because of a weather-related office closure, the FLSA contains a safe harbor provision, which provides that the exempt status of a category of employees affected by improper salary deductions will not be lost if the employer has a “clearly communicated” policy that prohibits improper deductions, provides for a complaint mechanism, and mandates reimbursement for improper deductions, and the employer makes a good faith commitment to comply with the FLSA in the future. Thus, employers should ensure their employee handbooks contain such policies and generally encourage employees to report any errors in pay, without fear of reprisal.

Preparing for the New York State Paid Sick Leave Law

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On April 3, 2020, New York State passed a law that will require employers with employees in New York to provide sick leave to their employees and, depending on the employer’s workforce size, this leave may have to be paid. This article addresses some frequently asked questions regarding the NYS Paid Sick Leave Law.

1. What employers are covered by this law?

All private-sector employers with workers in New York are covered by this law.

2. When is the NYS Paid Sick Leave Law effective?

The law takes effect 180 days after the enactment (i.e., September 30, 2020), and employees will begin accruing leave on that date. However, employees may NOT begin to use accrued NYS Paid Sick Leave until January 1, 2021.

3. How much time will employees receive under the NYS Paid Sick Leave Law?

Employees’ minimum accrual of time off under the NYS Paid Sick Leave Law is based on the employer’s size:

  • Employers with four or fewer employees and a net income of $1 million or less in the previous tax year are required to provide at least 40 hours of unpaid sick leave per calendar year.
  • Employers with four or fewer employees and a net income of greater than $1 million in the previous tax year are required to provide at least 40 hours of paid sick leave per calendar year.
  • Employers with five to 99 employees must provide at least 40 hours of paid sick leave per calendar year.
  • Employers with 100 or more employees must provide at least 56 hours of paid sick leave per calendar year.

To determine an employer’s size under the law, a “calendar year” is defined as the 12-month period from January 1 to December 31.

For the purpose of using and accruing paid or unpaid leave under the law, a “calendar year” means the 12-month period from January 1 through December 31, or any consecutive 12-month period, as determined by an employer.

4. Do we have to give the full required amount of sick leave (e.g., 56 hours) at once, or can we require the employees to “earn as they go”?

Employers have two options here. They can have the employee accrue as he/she goes. The minimum accrual rate is 1 hour accrued, per 30 hours worked (just like the NYC Paid Sick Leave Law). Or, employers can provide employees with the entire amount of leave at the beginning of the year. But, an employer who chooses to give its employees all the leave at once may not later reduce the amount of leave if the employee does not work sufficient hours to accrue the amount provided.

5. Can employees carry over the accrued and unused NYS Paid Sick Leave time at the end of the year, or must the employer pay any such accrued time out to an employee?

The accrued time may be carried over to the following year. There is no requirement to pay it out to the employee. However, employers who carry over any such time will still be limited to using the annual maximum amount in “year 2.” For example, if an employee has 10 hours accrued and left over in year 1, and the employee is working for a large employer, then in year 2, that employee will be able to use a total of 56 hours of paid sick leave (not 66 hours).

6. Can I limit the usage of yearly hours to a certain maximum?

Yes, the maximum usage is limited to 56 hours (or 40 hours, depending on the employer’s size and net income). Even if an employee carries over unused time from a previous year, the employee is always limited to either 56 hours or 40 hours of paid NYS Paid Sick Leave time per year.

7. What is the pay rate for employees who are receiving paid sick leave?

Paid sick leave must be paid at the employees’ regular rate of pay. If the regular rate is higher than New York minimum wage, employers are not permitted to pay for the use of NYS paid sick leave at the minimum wage rate. Again, the regular rate of pay must be paid when the paid time off is being utilized.

8. We are a NYC employer and already provide paid sick leave to employees per New York City Safe and Sick Leave. Do we now have to provide this additional time off under the New York State paid sick leave law?

Maybe. As covered NYC employers know, they are required to provide up to 40 hours of paid sick leave per NYC Safe and Sick Leave Law. Now, the NYS Paid Sick Leave Law requires (for large employers) that such employers provide at least 56 hours of paid sick leave. Such employers are required to provide a minimum total of 56 hours of paid sick leave. Such employers would not have to provide a total of 96 hours of paid sick leave.

9. If our current Sick Leave Policy allows employees to accrue up to 40 hours per year, do we now have to provide additional paid time off?

Maybe. First, the employer should consider its size. If the employer has 100 or more employees, then the employer will have to provide at least 56 paid sick leave hours per year to the employee. The employer’s policy providing 40 hours of paid time off will no longer suffice.

However, if the employer at issue has 50 employees, for example, then that employer is only required to provide at least 40 hours of paid sick leave. And, in that case, the employer would not have to provide more time off to its than 40 hours per year. Note, even though the total time off would not change in this example, the employer would have to update its written paid time off policy to ensure that it complies with the NYS Paid Sick Leave Law.

10. What happens to the accrued and unused sick time when an employee is terminated? Do we have to pay out that time?

Employers are not required to pay employees for accrued and unused sick leave upon an employee’s voluntary or involuntary separation from employment. To avoid any ambiguity in this regard, however, employers should have clearly written policies stating this forfeiture rule.

11. Does our employee handbook need to be updated to account for the NYS Paid Sick Leave Law?

Yes, employers must update their handbooks to reflect the new NYS Paid Sick Leave Law requirements.

12. What documentation must employers keep for purposes of complying with this Law?

Employers must track the amount of sick leave provided to employees. That information must be kept for at least six years, together with other information that an employer is obligated to keep and maintain as part of its payroll records.

An employee may request, verbally or in writing, a summary of the amount of sick leave they have accrued and used in the current calendar year or any previous calendar year. The law requires that an employer provide that information to a requesting employee within 3 business days.

End-of-Year New York State Paid Family Leave Considerations

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Changes to the New York Paid Family Leave Law are coming. Here’s what you need to know for January 1, 2020.

As 2020 approaches, New York employers should be cognizant of several changes that will take effect in relation to the New York Paid Family Leave Law (“PFL”) on January 1, 2020. As New York employers know, the PFL provides paid, job protected leave for eligible employees: (i) to care for a new child following birth, adoption, or placement in the home; (ii) to care for a family member with a serious health condition; or (iii) for qualifying exigencies related to military duty.

Effective January 1, 2020, employees taking leave under the PFL will receive 60% of their average weekly pay (up from 55% in 2019), up to a cap of 60% of the current Statewide Average Weekly Wage ($1,401.70). Thus, the maximum weekly benefit for an employee on PFL leave in 2020 will increase from $746.41 to $840.70. The number of weeks available for paid family leave will remain 10 weeks per year.

As New York employers know, PFL can be 100% employee funded. Thus, effective January 1, 2020, the employee contribution rate will increase from 0.153% to 0.270% of an employee’s gross wages each pay period (capped at the Statewide Average Weekly Wage), which means that an employee’s maximum annual contribution will increase from $107.97 to $196.72. Employees earning less that the Statewide Average Weekly Wage, however, will contribute less, consistent with their actual wages. Employers may start taking deductions at the new rate beginning on January 1, 2020.

The State has updated its website to provide an overview of these changes, as well as its FAQs to address, among other things, the benefits available to employees who start a period of leave under the NYPFLL in 2019 that extends into 2020. The FAQs make clear that employees will receive the benefit rate and number of weeks in effect on the first day of their leave. Thus, for example, if an employee starts PFL leave in 2019 that will extend into 2020, the employee is not eligible for the cash benefits at the 2020 rate.