Over the years, there’s been a paradigm shift in work culture, driven by the rise of gig economy and the digital revolution, has sparked an unprecedented boom in the freelance sector.
While the convenience and flexibility of freelancing can be appealing, these benefits often come with their own set of challenges:
- late payments
- and scope creep being the most notable
Recognizing these challenges, the city of New York enacted the “Freelance Isn’t Free Act” in 2017, a ground-breaking piece of legislation designed to protect the rights of freelancers.
But before we go further, checkout this video which highlights an interesting case of what one freelancer did when they weren’t paid.
The Freelance Isn’t Free Act: An Overview
The “Freelance Isn’t Free Act” (FIFA), which was something the Freelancers Union advocated for, is the first law of its kind in the United States, was enacted to provide much-needed protection to freelancers. It mandates that all freelance agreements worth $800 or more, either by itself or in aggregate over a 120-day period, must be in writing.
This contract must include the names and addresses of both parties, an itemized list of services to be provided, the rate and method of payment, and the date by which the hiring party must pay the freelancer.
In a significant move towards ensuring timely payments, FIFA stipulates that unless otherwise agreed, freelancers should be paid within 30 days of completing their work. If the hiring party fails to pay within this time frame, they could face penalties, including:
- statutory damages
- double damages
- injunctive relief
- and attorney’s fees
This acts as a strong deterrent against delayed or non-payment, ultimately supporting freelancers’ rights to be paid on time.
Importance of Timely Payment for Freelancers
Freelancers are self-employed individuals who bear all business-related expenses such as taxation, retirement funds, and health insurance. Unlike traditional employees, freelancers don’t have the safety net of a consistent paycheck. Therefore, timely payment is not just a matter of convenience, but a necessity for their financial stability and sustainability.
When clients delay payments, freelancers may face cash flow problems, affecting their ability to meet their business and personal obligations. These delays can also create a cycle of chasing payments, taking valuable time and energy away from actual work. Hence, timely payment is crucial for freelancers to function effectively and maintain their financial health.
Combatting Scope Creep
Scope creep, the gradual expansion of a project’s objectives without corresponding adjustments in resources or timelines, is a common issue faced by freelancers. It is not only a potential source of payment disputes but can also lead to burnout and diminished job satisfaction.
Freelancers can protect themselves from scope creep by explicitly defining the project’s scope in their contracts. They should ensure the contract details the work to be done, the deliverables, deadlines, and payment terms. If additional work is requested outside the agreed-upon scope, freelancers should feel empowered to negotiate additional compensation and timeline extensions or even decline the additional work.
How Freelancers Can Protect Themselves
While the “Freelance Isn’t Free Act” provides essential legal protections, freelancers should also adopt proactive strategies to protect themselves from late or non-payment and scope creep.
If a client doesn’t pay a freelancer for their services, it can be a frustrating and challenging situation for the freelancer. Here are some possible scenarios and steps that a freelancer can take in such a situation:
- Clear Contracts: Always ensure that all agreements are in writing, even for smaller jobs or with trusted clients. Include as much detail as possible – the scope of work, deadlines, payment terms, and what happens in case of late payment or contract termination.
- Communication: The freelancer should reach out to the client to inquire about the payment status. It’s possible that there was a misunderstanding or oversight, and a simple reminder might prompt the client to fulfill their payment obligation. If additional work is requested, discuss it promptly and amend the contract if necessary.
- Upfront Payments, Invoice, Documentation: If possible, ask for part of the payment upfront. This not only improves cash flow but also demonstrates the client’s commitment to the project. The freelancer should ensure they have proper documentation of the work completed, including an invoice with clear payment terms and due date. This documentation can serve as evidence in case further action is required.
- Follow-up: If the client does not respond or fails to make the payment within a reasonable time frame, the freelancer should continue following up with polite reminders, emphasizing the importance of timely payment.
- Negotiation: In some cases, the client may express financial difficulties or dispute the quality of the work. In such situations, the freelancer can try to negotiate a resolution that is mutually acceptable, such as partial payment or revisions to address any concerns.
- Legal Options: If all attempts to resolve the issue amicably fail, the freelancer may consider legal options. This could involve seeking legal advice, sending a formal demand letter, or taking the matter to small claims court or arbitration, depending on the amount owed and applicable laws. In the case of New York City, the Office of Labor Standards (OLS) enforces the “Freelance Isn’t Free Act” and freelancers can file a complaint with them.
- Debt Collection Agencies: As a last resort, the freelancer may engage a debt collection agency to recover the unpaid amount. These agencies specialize in recovering debts but typically charge a percentage of the collected amount as their fee.
It’s essential for freelancers to establish clear payment terms upfront, maintain proper documentation, and communicate effectively to minimize the risk of non-payment.
The rise of freelancing presents exciting opportunities but also significant challenges.
Measures like the “Freelance Isn’t Free Act” are important steps towards recognizing and addressing these issues, ensuring that freelancers can enjoy their flexibility and independence without sacrificing their rights and protections.
Nonetheless, freelancers must also be proactive in defending their interests and ensuring that they are compensated fairly and timely for their work.