One Year In: Freelance Isn’t Free Act Fuels a Surge of Lawsuits - by Andrew Lieb

August 28, 2025 was the one-year anniversary of the effectiveness of the New York State Freelance Isn’t Free Act. In just that short while, the Freelance Act has become a hot button litigation topic in the real estate brokerage world. Countless lawsuits and arbitrations have emerged on the topic with real estate agents bringing claims for huge damages against their real estate brokers. This has caught many ill-prepared real estate brokers flat-footed and cost them huge sums of money. It has also struck the other way, by falsely emboldening many agents into miscalculating their leverage by misapplying the law. This is especially risky where brokers were smart enough to strategically require Independent Contractor Agreements and Policy Manuals that provide rights to claim attorneys’ fees, costs, and expenses in defending these types of claims. Additionally, the law throws a rock into this hornet’s nest by also empowering the Attorney General to investigate and bring action, in its own name, while seeking injunctions, restitution, and civil penalties. Simply, the Freelance Isn’t Free Act cannot be ignored any longer by real estate salespersons and real estate brokers.  

The Statewide Freelance Isn’t Free Act is codified at General Business Law Article 44-a and should be reviewed immediately by both brokers and salespersons. The law essentially levels the playing field for independent contracts, as compared to employees, by affording them rights to work under written contracts with agent-favorable provisions, receive copies of those contracts, and be paid by strict statutory deadlines. Then, there are the penalties. Under certain readings of the law, an independent contractor can claim up to four-times the amount of money that they are allegedly owed from their broker plus reasonable attorneys’ fees and costs. However, one big hangup for agents and their incompetent attorneys in bringing those claims is that the law only applies to individuals, not teams, by its express terms of applicability, which states that it applies only to “no more than one natural person.” So, before considering litigating this topic, tread carefully and understand the precise nuances of the law.  

If you choose to litigate, be mindful that the Freelance Isn’t Free Act is only the appetizer to most disputes between agents and their brokers. The next course is the NYS Human Rights Law which protects non-employees from discrimination at work, the Labor Law §740 that protects whistleblowers from retaliation, and misclassification claims where an agent can claim that they were really an employee and are therefore entitled to their unpaid wages and other damages. Then, there is the main course, which is comprised of tailored breach of contract claims derived from the specific Independent Contractor Agreements, Supplemental Agreements, Side Letters, and the Policy and Procedure Manual (a/k/a, Handbook) existing between this agent and their broker. Therein lies the meat and potatoes of these disputes where agents are typically subject to contractual rights comprised of a smorgasbord of restrictive covenants [like non-disclosures, non-competes, non-solicitations] and golden handcuffs [like, training repayments (a/k/a, training draws), marketing claw-backs, and commission cram-downs (a/k/a, drop-downs)]. Plus, there are rules over misappropriation of intellectual property by agents; post-termination rights to listings, buyer brokerage agreements, client / customer lists; and indemnification provisions. Finally, there are all sorts of procedural rules contained within these contracts that cannot be ignored, like arbitration clauses, class action waivers, and other minutia that would make your head spin.  

Back to the statutes, when it comes to misclassification, the fact that the broker and agent identify the agent as an independent contractor is irrelevant to the resolution of a claim. Just so you know, according to the National Employment Law Project, 10% to 30% of purported independent contractors are misclassified. Albeit the field of real estate brokerage is unique. It offers a safe harbor to classify agents as independent contractors based on satisfying certain requirements contained within the Federal Internal Revenue Code and the New York State Labor Law (i.e., the independent contractor agreement having been executed within the past 12 to 15 months, amongst others). Assuming the safe harbor is inapplicable, the judge will determine this claim by the federal “economic realties test” and the NYS “control test”. Under these tests, if the broker exerts too much control over the results and means of the job, a misclassification has occurred, and the agent can claim back wages, liquidated damages (2X missed wages), and attorneys’ fees. 

Next up is discrimination, where the New York State Human Rights Law, at §296-d, protects “non-employees,” such as independent contractors, who “provid[e] services… pursuant to a contract in the workplace…”. As such, a broker may not discriminate against an agent based on the agent’s protected class (race, age, religion, sex, etc.). Discrimination occurs in many forms, such as an adverse action, a hostile work environment, a quid pro quo for sexual favors, or disparate impact. Available damages include emotional distress, front pay, back pay, attorneys’ fees, and more. 

Next is whistleblowing, under Labor Law §740, which prohibits retaliating against an agent who “(a) discloses, or threatens to disclose to a supervisor or to a public body an activity, policy or practice of the employer that the employee reasonably believes is in violation of law, rule or regulation or that the employee reasonably believes poses a substantial and specific danger to the public health or safety; (b) provides information to, or testifies before, any public body conducting an investigation, hearing or inquiry into any such activity, policy or practice by such employer; or (c) objects to, or refuses to participate in any such activity, policy or practice.” If retaliation has occurred, the agent can seek an injunction, reinstatement, front pay, back pay, attorneys’ fees, civil penalties, and punitive damages. 

Looping back to the beginning, it has been one year since the start of the Statewide Freelance Isn’t Free Act and there has been an uptick in litigation between brokers and their agents. Yet, these cases go far beyond the Freelance Act and mainly focus on breach of contract with a side of discrimination, whistleblowing, and misclassification claims. These disputes are nuanced and you really need to be prepared before making or defending a claim. This starts by reviewing all your contracts and consulting with a brokerage litigator prior to barking up the wrong tree.

Andrew Lieb is the managing partner at Lieb at Law, P.C., Smithtown, NY.