by John Otrompke
It may have been buried in the tumult following this fall’s election, but New York City passed landmark social reform legislation in November, which may help to assure that the city continues to be a remarkably decent place to be creative and independent.
The Freelance Isn’t Free Act (FIFA), which became law on Nov. 16, makes significant changes to traditional contract law, and with but one exception, it probably doesn’t raise any major issues under the U.S. Constitution.
While FIFA falls short of the more thorough redistribution of economic power I favor, FIFA should nonetheless be helpful to independent contractors, and is worthy of celebration.
FIFA’s Economic Rationale
FIFA is designed to protect independent contractors; indeed, the law was motivated, in part, by the growth of self-employed workers as a economic sector.
According to some researchers, for example, more than 14.8 million people (constituting more than 10% of workers in the U.S.) were self-employed in 2014. The sector was growing at a rate of 5.4% per year. (1)
Indeed, FIFA is one of a number of laws addressing contract law and independent contractors which governments in New York state have mulled in recent years. Other examples have included the Construction Industry Fair Play Act (2014), the New York State Commercial Goods Transportation Industry Fair Play Act, and Assembly Bill 2539 (2016), which concerns modeling agencies.
Many factors combine to render freelancers vulnerable to unfair contract negotiations. However, contract law applies to almost everyone in our society, and is elegantly simple in design. Therefore, it is useful to learn a little bit of it.
Basically, in our society, having an enforceable contract just requires an offer, acceptance, and consideration.
In layperson’s terms, that just means that both sides agree that there should be a deal, and each side agrees to do something, or give something, of value in exchange for it. In some cases, these critical requirements can even be established through a series of emails.
Nor does a contract even necessarily have to be in writing, though there are a few exceptions, which were created by a law passed in England in 1677, called ‘the Statute of Frauds.’ Exceptions, or types of contracts that have to be in writing to be enforceable, include contracts for marriage, or for the sale of land, or for the sale of goods worth more than $300, or for work which cannot be performed in less than a year, among a couple of others.
How Does FIFA Change Contract Law?
FIFA changes that rule, but it does so in a way that requires the client to assume a little bit of the freelancer’s burden. FIFA requires contracts for work worth more than $800 to be in writing; but it doesn’t appear to render such a contract which is not in writing unenforceable; instead, it penalizes the client by allowing the freelancer to sue them for $200 per violation.
Perhaps FIFA may even apply to a contract that specifies a “kill fee,” or that claims to give the client a right to “cancel” the agreement at will; because such agreements lack what is known as “mutuality of obligation,” such a document could be considered a ‘non-contract,’ and so open up the client to FIFA liability.
And FIFA also contains a prohibition against retaliation, which means that if an independent contractor sues a client for doing business without a written contract, perhaps they could assert a right to future business if they’ve done a good job.
But probably the biggest change to contract law made by FIFA is that it creates a cause of action for double damages for breach. One of the things that makes it hard to be a freelancer in much of the country is that conventional contract law may sometimes only allow an individual to recover the amount they were promised. Hopefully, another FIFA provision, which can make the client pay a freelancer’s attorney fees, will also make it easier to go to court, and thus, make it easier for independent contractors to stay in business.
All in all, FIFA enacts a wide variety of remedies, some of which are available to individuals, while others are available to the City Department of Consumer Affairs, which may pursue civil penalties of up to $25,000.
Of course, there are limitations in the law: it doesn’t apply to doctors, lawyers, or salespersons, for example, and its effective date was delayed for six months.
FIFA is Immensely Beneficial and Probably Constitutional
As mentioned earlier, while FIFA makes some dramatic changes to traditional American contract law, for the most part, the changes are unlikely to have constitutional implications (with one exception, which is soon to be discussed).
Why is that? After all, you might think, Article I, section 10, clause 1, of the American Constitution contains an explicit clause referring to contracts.
For a brief period shortly the Civil War, this clause (known as the “Bills of Attainder clause”) was even referred to as “our Bill of Rights in miniature against the states[.]” (2).
The clause reads “No State shall...pass any Bill of Attainder, ex post facto Law, or Law impairing the Obligation of Contracts[.]”
But much of its import was read out of the Constitution in the Depression era, following a famous political maneuver named by newspapers (and forever after referred to by law professors as) “the switch in time that saved the nine.”
(As an interesting side note, while FDR’s court-packing scheme of the Great Depression era is famous among American legal scholars, it was far from the only time a government has resorted to such measures. Historians, for example, may remember the threat to pack the House of Lords made in 1832 by the British Crown, which had the power of making new peers, and thereby resolved the crisis over the Reform Act, which had been stalled by the bicameral nature of Parliament). (3)
Prior to the Depression and Roosevelt’s court-packing scheme, the Supreme Court had often held that the constitution makes it difficult for the federal government to intervene in contractual matters, good motives notwithstanding.
At the time, the drive to radically redistribute America’s financial power and resources was suppressed, at least temporarily. And when the Depression struck, it became apparent that there was a real place in society for social welfare measures. The jurisprudential situation came to a head in West Coast Hotel Co. v. Parrish, 300 US 379 (1937), in which the Supreme Court upheld early minimum wage laws.
Thereafter, many social welfare laws in the 20th century changed contract law.
It is also important to note that some state constitutions still pay respect to the traditional view that the right to earn a living is a fundamental constitutional right. While
such “right to work” laws are sometimes characterized as union-busting schemes, there are some good things about the concept, too. (In particular, such a principle might make it easier to get government-issued professional licenses, take some of the mystery out of the process, and take away a certain amount of governmental discretion in licensure matters).
Conclusion
So if most of FIFA is likely to pass constitutional muster under contemporary views of the Obligation of Contracts clause and the 14th Amendment selective incorporation process, then what is the exception?
There is one other interesting provision of FIFA that I have not yet mentioned, which in some cases makes it a criminal misdemeanor for a client to fail to pay a freelancer.
If this provision is ever enforced, are we headed back to the era of debtor’s prison? While some say that era never really disappeared, the Supreme Court has put
certain limitations on imprisonment for debt. In Bearden v Georgia, 461 US 660 (1983),
the Supreme Court held that a debtor’s imprisonment violates the Fourteenth Amendment in the absence of evidence that the person being prosecuted willfully chose not to pay the debt.
FIFA makes significant changes in the traditional law of contract, which are likely to redound to the benefit of independent contractors. With the possible exception of the law’s criminal provision, FIFA will probably will not raise any constitutional issues.
The main question which remains is whether other jurisdictions will follow suit.
John J. Otrompke, JD, is a legal commentator, and was a 2015 faculty applicant at the Association of American Law Schools faculty recruitment conference. He has never practiced law. He has worked as a freelance journalist, and has been associated with Chicago Working Journalists (which is an effort involving the unionization of freelance writers).
1 Maher M, “Freelance Isn’t Free: The Rise of the Abandoned Workforce,” p. 14 Thesis paper, CUNY Baruch College, Spring 2016 (on file with the author).
2 See, for example, Cummings v Missouri, 71 U.S. 277 (1867); Ex Parte Garland, 71 U.S. 333 (1866).
3 Bagehot, W, “The English Constitution,” p. 79 (Oxford University Press, 2009).
