Independent Contractor vs. Employee in NY

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Disclaimer

This guide addresses some of the criteria for independent contractor classification and some of the responsibilities of small businesses in New York State and New York City who hire individuals to provide services for the business. It does not include every consideration and responsibility, and there are many more resources on these topics. This guide does not cover all the related laws and regulations. This guide was last updated on October 10, 2026, and some of the information may have since changed. The information in this guide does not create an attorney-client relationship, is not legal advice and is not intended to be relied upon as legal advice. If you have a legal issue, you should not rely on this information and instead speak to an attorney.

This guide includes links to third-party websites for access to information and resources. We do not control these websites. We have not reviewed all the content that appears on these websites, and are not responsible for the legality, accuracy, or appropriateness of their content. Content on these websites may change at any time, including after we decide to share their links on this site. For legal advice about your specific situation, you should consult with a qualified attorney.

Introduction

The determination of whether an individual is an employee or an independent contractor of a business can have significant implications for legal risks and liability, civil rights, taxes, benefits like unemployment insurance, and more. Some of the attributes of the relationship to consider are whether the individual performs their work without direction or control from the business (in the contract and in reality), performs the services in their own name or the business’s name, offers and delivers their services to the general public or business community regularly and free of the business’s input, and pays for their own licenses, supplies, and administrative costs.

Business owners are encouraged to speak with an experienced attorney to assess whether individuals should be treated as employees or independent contractors.

 Determining if Someone is an Employee or an Independent Contractor

No single factor is determinative. The parties’ label for the relationship does not by itself determine worker status. Courts consider many factors to determine the degree of supervision, direction, and control over the manner, means and results of the work.  Courts have considered:

• When, where and how the work is performed;

• Whether prior permission is required for absences;

• Who provides the facilities, equipment, tools, and supplies;

• Whether someone is providing direct supervision over the work;

• Who sets hours and rate of pay;

• Whether the worker may provide services to others;

• Whether attendance at company meetings or trainings is required;

• How is the worker compensated (salary, hourly rate, draw against future commissions, etc.); and

• Whether the worker receives fringe benefits.

Hallmarks of Independent Contractor Status

Independent contractors offer their own services as a business to the general public without direct supervision or control in how they perform their duties. Some factors to consider are whether the worker:

• has an established business entity or DBA;

• pays their own expenses and assumes risk of profit or loss;

• carries their own applicable insurance;

• is free to accept or decline assignments;

• offers services to several businesses simultaneously; and

• sets and negotiates their own schedule and rate of pay.

Penalties for Misclassification

Misclassification of an employee as an independent contractor may result in:

• a lawsuit for damages, including unpaid wages;

• liability for back taxes with interest and penalties by the IRS and applicable state agencies;

• penalties for lack of coverage for Workers’ Compensation Benefits, Unemployment Insurance, Disability, and Paid Family Leave; and

• penalties for retaliation against or harassment of an independent contractor.

RESPONSIBILITIES OF SMALL BUSINESSES WITH INDEPENDENT CONTRACTORS

Wages

Employers in New York are required to pay employees the applicable State or City minimum wage. On the other hand, properly classified independent contractors generally are not entitled to employee minimum-wage, overtime, or benefit protections.

Freelance Isn’t Free Acts (New York State & New York City)

Freelancers in New York are protected by two overlapping laws: the statewide Freelance Isn’t Free Act (New York General Business Law Article 44-A), in effect since August 28, 2024, and New York City’s earlier Freelance Isn’t Free Act. Both apply to covered hiring parties and covered freelance workers.

New York State

Under the state law, covered engagements totaling $800 or more generally require:

1)    A written contract. The agreement with the freelance worker must be in writing. This applies when the engagement is worth $800 or more, whether on its own or combined with other work for the same hiring party over a 120-day period.

2)   Timely payment. The worker must be paid on or before the date specified in the contract. If the contract doesn’t specify a payment date, payment is generally due within 30 days after the work is completed.

3)    Remedies for non-payment. Non-payment or partial payment can support a legal claim for the amount owed, additional damages of up to double that amount, and the worker’s attorneys’ fees.

New York City

NYC’s Freelance Isn’t Free Act continues to apply within the city and imposes similar obligations. Its remedies include:

• Liquidated damages. Additional damages of up to double the value of the contract, plus the worker’s attorneys’ fees.

• City enforcement. The City may bring an action against a hiring party that shows “a pattern or practice of violations,” with civil penalties of up to $25,000.

Taxes

Employers typically are not required to withhold taxes for independent contractors.  However, effective January 1, 2022, New York employers must report to the New York State Department of Taxation and Finance any independent contractor arrangement in excess of $2,500. Visit the NYS New Hire Online Reporting Center website for more information.

Sick Pay and Sick Leave

New York employers generally are not required to provide statutory employee sick leave to properly classified independent contractors.

Pay Transparency in NYC

Effective November 1, 2022, covered NYC employers with four or more employees must include a good faith pay range in each job advertisement, including for independent contractors.

Workers’ Compensation and Disability

New York employers are generally not required to provide workers’ compensation or disability coverage to independent contractors. Businesses should consider the Workers’ Compensation Board’s criteria for independent contractor designation.

Immigration Status/Work Authorization

While the federal government does not require employers to obtain a Form I-9 (Employment Eligibility Verification) for independent contractors, federal law prohibits knowingly contracting with an independent contractor without authorization to work in the U.S.

Sexual Harassment Policies and Trainings, Discrimination, and Accommodations

Under the New York State Human Rights Law, independent contractors and other nonemployees receive protections against workplace discrimination, harassment, and retaliation. These protections apply to employers throughout the state, including New York City. Every New York employer must adopt a sexual harassment prevention policy that meets or exceeds the State’s minimum standards. The State’s annual sexual harassment prevention training requirement applies to employees. You can find more information on the State’s Combatting Sexual Harassment in the Workplace site.  

New York City

The City’s Human Rights Law extended protections to independent contractors effective January 11, 2020.  Protections include:

• Sexual harassment training. Employers with 15 or more employees must offer training to independent contractors who work more than 80 hours in a calendar year and for at least 90 days.

• Freedom from discrimination and retaliation, and the right to reasonable accommodations for disability, pregnancy or lactation, religious observance, or status as a victim of domestic violence, sexual offenses, or stalking.

The New York City Commission on Human Rights has developed an online training that satisfies both the New York State and New York City sexual harassment prevention training requirements that is available here.

Protected Characteristics

Federal, state, and local laws protect most workers from discrimination, bias, and harassment based on certain protected characteristics. New York State law protects most workers against discrimination or harassment based on their age, race, creed or religion, color, national origin, citizenship or immigration status, sexual orientation, gender identity or expression, military status, sex, disability, predisposing genetic characteristics, familial status, marital status, status as a victim of domestic violence, and arrest or conviction record.

New York City protects all of the characteristics above and adds protection based on caregiver status, credit history and pre-employment marijuana testing, height, weight, unemployment status, sexual and reproductive health decisions, salary history, and status as a victim of domestic violence, stalking, and sex offenses.

Reasonable Accommodations

In New York City, independent contractors and freelancers also have rights to reasonable accommodations under the NYC Human Rights Law for covered needs such as disability, pregnancy/lactation, religion, and certain victim-status needs. Other accommodation obligations depend on the applicable law and relationship.

Health and Safety in the Workplace

Federal, state, and local workplace-safety requirements vary depending on the worker relationship and worksite. The U.S. Department of Labor Occupational Safety and Health Administration (OSHA) has information about their requirements on their website here and in their Small Business Safety and Health Handbook.
In New York, the Department of Labor, the Department of Health and local health departments have additional requirements for workplace safety. You can find more information on their websites here: Department of Labor and Department of Health (includes links to local health departments).

Consult a Small Business Attorney

An experienced attorney can determine your business’s specific responsibilities and advise you about how to efficiently meet them. Contact Pepitone Law for a consultation.

You can also find more information in our guide, “Responsibilities of New York Employers.”