The GigReporter

SCI reported last year on the New York State Freelance Isn’t Free Act, originally scheduled to take effect this May. Since then, a new version has been signed into law, delaying its implementation to August 28.  It is important for New York logistics brokers to understand how the law regulates the relationship between principals and independent contractors.

Substantive requirements for principals hiring independent contracts are largely the same as the original law. In summary, freelance workers (individuals or single-member organizations) hired as independent contractors must be provided with itemized, written contracts and receive compensation by the dates specified in the contract. Plaintiffs prevailing on claims may be awarded double damages, attorney’s fees, and in some cases the full value of the underlying contract, so there is a risk of very large awards.

Originally located in Section 191-d of the Labor Law, the revised Act is now found in Article 44-A of the General Business Law (§§ 1410 et seq.). The significance of placing this withing the General Business Law is that now the attorney general, rather than the commissioner of labor, is authorized to investigate complaints of violations and bring lawsuits to enforce the Act on behalf of the government.  Presumably the Attorney General’s office has more resources and the threat of civil suit whereas various powers and responsibilities previously given to the commissioner, such as the ability to receive assigned claims from third parties or the obligation to track information about complaints and regularly publish reports about them, have been omitted entirely.

SCI’s compliance advice for logistics brokers remains the same:

Here's how SCI recommends its broker clients proceed to protect themselves:

·         SCI has long been an advocate of having a Negotiated Rate agreement in place that would include the essential terms needed to fulfill the Act’s requirements.  Check with SCI to have a Negotiated Rate agreement drafted for your particular situation.

·         For those who haven’t taken the step to put in place a Negotiated Rate agreement then you should:

• Verify status.  If you contract with any business that you believe is made of more than one person, have a representative from that business verify that fact in writing, and save that document.  Likewise, check with every LLC or other business organization you hire, especially those of which you are unsure, as to whether they comprise more than one person.

• Define “completion”.  The Act requires payment after “completion” of services.  Your contracts with owner/operators should specify that services are only to be considered “completed” when cargo is delivered to the correct location and in an undamaged condition, and that if deliveries are not adequately completed, then no payment shall become due.

• Specify invoicing requirements and procedures.  Ensure your contracts state that payment will not become due until after the owner/operator submits an invoice for their work and set forth a procedure for submitting said invoices that won’t go ignored by you or any others at your business that may receive them.  Set forth a time after the proper submission of an invoice by which a payment will be made; it may be wise to make this somewhat longer than your actual practice to give you leeway in case of unexpected problems causing small delays.

• Seek alternative resolutions.  Most brokers already feel that withholding pay from an owner/operator to satisfy a customer’s demands should be a last resort, but more than ever other solutions must be sought first.  Cargo insurance that can cover the cost of replacing lost or damaged goods without additional withholdings should be strongly considered; SCI’s beneficial programs for owner/operators include affordable cargo insurance programs, so you may want to alter your contracts to include a minimum insurance coverage requirement.

·         Final thought: an active Third-Party Administrator, like SCI, that helps ensure compliance and proactively engages with independent contractor drivers when  problems arise are the best ways to avoid issues.