From JDSupra, Kerri Feczko, Darren Mungerson, and Matthew Ruza discuss the recent law in Illinois that provides protections to freelancers that are similar to the protections passed by a number of cities. Kerri, Darren, and Matthew write:
On August 4, 2023, Governor JB Pritzker signed the Freelance Worker Protection Act (FWPA) (HB1122) into law, establishing strict protections for freelance workers.
The FWPA defines a “freelance worker” as anyone hired or retained as an independent contractor to provide products or services in Illinois or for any Illinois-based entity in exchange for compensation of at least $500 (either in a single contract or in the aggregate of all contracts during the last 120 days). However, the FWPA specifically excludes: (1) workers performing construction services; (2) workers performing services as an employee for a contractor who engages in construction; (3) workers engaged in the traditional employer-employee relationship as defined by the Illinois Wage Payment and Collections Act; and (4) all foreign, federal, state, and local government entities including school districts. In addition, the law defines “freelance worker” as a “natural person,” which is defined as an “individual human being.”
The FWPA sets forth three requirements for hiring or retaining a freelance worker:
First, the retention of a freelance worker to provide services or products valued at $500 or more requires that the agreement be memorialized in a written contract. A copy of the contract must be provided to the freelance worker and must be retained by the contracting entity for a period of two years. While the FWPA requires that the Illinois Department of Labor (IDOL) provide a model contract template via its website at no cost to the public, it specifies that any contract must, at a minimum, include: (1) the name and contact information of both parties including the mailing address of the contracting entity; (2) an itemization of all products or services to be provided, the value of the products/services, and the rate and method of payment; (3) the date by which the contracting entity must pay the freelance worker, on a date no later than 30 days after the product or service has been provided; and (4) the date by which the freelance worker must provide a list of products/services rendered under contract (i.e., invoice) if necessary to meet the contracting entity’s internal processing deadlines for purposes of timely payment.
Second, a contracting entity must pay the freelance worker within 30 days after the freelance worker has completed the services or delivered the product. Additionally, once the freelance worker has started preparing the product or service under the contract, the contracting entity cannot ask the freelance worker to accept less compensation than the amount specified in the contract as a condition of timely payment (e.g., offering to pay in installments if full payment is not rendered within the 30-day period).
Third, contracting entities are prohibited from engaging in any discriminatory, retaliatory, or harassing behavior toward contracted freelance workers. Prohibited behavior includes threatening, intimidating, disciplining, harassing, deterring, denying work opportunities to, or otherwise penalizing freelance workers who exercise their rights under the act.
Significantly, the FWPA permits freelance workers to seek recourse against contracting entities for violations by filing a complaint with the IDOL or filing a complaint in Illinois circuit court. In either case, freelance workers must file their complaint within two years after final compensation was due. Unlike the EEOC or IDHR administrative process, an aggrieved freelance worker is not required to file a complaint with the IDOL prior to filing a complaint in court. Moreover, a freelance worker can file suit in Illinois circuit court on behalf of a class of other similarly situated freelance workers. Upon reasonable cause to believe that an entity is engaged in a pattern or practice of FWPA violations, the Illinois attorney general may also initiate civil action.
Potential penalties and damages vary depending on the violation. For untimely payments, freelance workers are entitled to recover double the amount of any underpayment, injunctive relief, costs of suit, and all reasonable attorneys’ fees. For violations of the written contract requirement, freelance workers are entitled to statutory damages equal to the value of the underlying contract or $500, whichever is greater, in addition to the other remedies provided. And finally, for violations of the nondiscrimination section, freelance workers are entitled to damages equal to the value of the underlying contract for each violation, as well as costs and all reasonable attorneys’ fees.
Although Illinois is the first state to pass freelance worker protection laws, freelance worker protection is gaining steam nationwide with other states – such as New York (A6040/S5026), Kansas (HB2399), and Missouri (HB1331) – which have introduced similar freelance worker protection bills in the last year. Likewise, city-specific freelance worker protections have long-existed in Seattle, Columbus, Los Angeles, Minneapolis, and New York City.
The FWPA is scheduled to take effect beginning on July 1, 2024. The FWPA will apply only to contracts taking effect after the effective date of the Act.
Recommendations to Employers:
- Determine whether any independent contractors providing services for your organization fall within the definition of freelance worker.
- Check the IDOL’s website for a contract template to ensure that any freelance worker contract is compliant with the FWPA.
- Amend any document-retention policies to provide for the retention of freelance worker contracts for two years following execution.
- Ensure that your payroll department is notified and equipped to process contract payments within 30 days of completion of the service or product.
- Because nothing in the FWPA shall be construed as providing a determination regarding a worker’s legal classification as an employee or independent contractor, consult with counsel before re-classifying any individual.