Assigning certain tasks to freelancers can ease some of the pressures off a busy small business owner juggling multiple responsibilities. An estimated 55 million Americans currently work in a freelance capacity, according to the Freelancers Union. As a matter of fact, the ranks continue to swell.

In New York City, the recently adopted Freelance Isn’t Free Act has put certain new protections in place for freelancers. If you rely on freelancers to help with things like marketing, web design or anything in between, here are the most essential things you need to know about the Act and how it stands to impact small business owners.

Key Provisions of the Act

The Freelance Isn’t Free Act ensures working freelancers in NYC receive payment for their services. The Act, which is the first of its kind, gives freelancers in the Big Apple enhanced legal protections beyond current labor laws. Specifically, the new law outlines the rules governing relationships between freelancers and the businesses they work with, including the following rights:

• A freelancer can request a written contract.
• To receive payment in a timely manner and in full for services rendered.
• To be free of retaliation for requesting payment.
• The imposition of monetary penalties against businesses violating these rights.

Additionally, any contract established between a freelancer and a small business owner must include:

• Name and address information for both parties.
• A detailed list of the services the freelancer is providing and their value.
• Amount a freelancer will receive and how payment will be made.
• The time frame in which the freelancer will receive payment.

The Act curbs payment abuses among businesses using freelance workers. According to the Freelancer’s Union, 70 percent of freelancers have dealt with nonpayment from a client. In fact, the average loss of income totaling $6,000.

Why Small Business Owners Should Take Notice

Is there reason to worry about the Freelance Isn’t Free Act if your small business is based outside of NYC? The law is active in a single city at the moment. However, there’s nothing to prevent the movement from catching on in other locations. As a result, small business owners could potentially face stiff penalties for nonpayment.

In New York, the Act fines repeat offenders up to $25,000. That could be damaging for a small business that utilizes freelancers on a regular basis. More so if it is perhaps struggling to pay on time because of an uneven cash flow. Then the prospect of receiving such a large fine is enough for some small business owners to avoid contracting with freelancers altogether.

On the other hand, the alternative scenario is to perform the tasks normally handed over to a freelancer yourself, assign them to an existing staff member or hire someone new. Unfortunately, none of these is a perfect solution. Doing it yourself could save you the expense of paying an employee overtime to handle the extra workload or hiring someone new. The tradeoff, however, is that any savings you may realize comes at the cost of your own time.

While it remains to be seen whether other cities will follow suit and adopt measures to protect freelancers, the possibility is not dismissed. In the meantime, it may be a good time to review your current contract terms if you routinely hire freelancers for short- or long-term projects. If the guidelines are loose, making adjustments using the Freelance Isn’t Free Act as a compass could help you avoid problems down the road if freelancer protection laws become a reality in your small business’s home turf.