The U&K team of Hannah Prescott, Ryan Biesenbach, Joshua Beisker, and Roman Martyniv enjoyed the sunshine, good food, friendly competition, and being together for a great cause at the 2024 J.P. Morgan Corporate Challenge in Rochester, NY.

The United States Supreme Court ruled unanimously earlier this month in an employment misclassification case (Smith v. Spizzirri, U.S., No. 22-1218, 5/16/24), that federal courts lack the discretion to dismiss lawsuits even after determining that all the underlying claims are subject to mandatory arbitration agreements. The ruling settles a split among federal circuit courts on the issue while clarifying the scope of judges’ jurisdiction over cases subject to arbitration. The case interprets the Federal Arbitration Act (FAA) and arose out of a suit by delivery drivers who alleged that IntelliQuick Delivery Inc. misclassified them as independent contractors to avoid paying minimum wage, overtime, expense reimbursement, and sick leave required by federal and state laws. The FAA sets forth procedures for enforcing arbitration agreements in federal court. Section 3 of the FAA, entitled “Stay of proceedings where issues therein are referable to arbitration,” provides that when a dispute is subject to arbitration, the court “shall on application of one of the parties stay the trial of the action until such arbitration has been had in accordance with the terms of the agreement, providing the applicant for the stay is not in default in proceeding with such arbitration.” 9 U. S. C. §3. In this case, petitioners filed suit against respondents in state court and respondents then removed the case to federal court and filed a motion to compel arbitration and dismiss the suit. Upon the motion, both parties agreed that the issue was subject to mandatory arbitration. The drivers, however, requested a stay pending arbitration, rather than dismissal. The district court dismissed the case in favor of arbitration and its ruling was upheld by the 5th Circuit Court of Appeals. The Supreme Court unanimously reversed and ruled that the FAA requires district courts to stay lawsuits rather than dismiss them pending the outcome of private dispute resolution proceedings when one party requests it. Noting that Section 3 of the FAA directs that a district court referring a case to arbitration “shall on application of one of the parties stay the trial of the action until such arbitration has been had,” the Court found that there is no discretion for the district court. “In this statutory interpretation case, text, structure and purpose all point to the same conclusion: When a federal court finds that a dispute is subject to arbitration, and a party has requested a stay of the court proceeding pending arbitration, the court does not have discretion to dismiss the suit on the basis that all the claims are subject to arbitration,” Sotomayor wrote. IntelliQuick’s attorneys argued that the FAA doesn’t bar dismissal and that Congress never intended to allow courts to retain jurisdiction over cases sent to arbitration. They further argued that the law’s purpose is to enforce parties’ contractual obligations to arbitrate disputes and avoid parallel litigation, and that allowing a stay would encourage parties to ignore their arbitration agreements and jump right to filing suit, which could overburden the court system and unnecessarily drain judicial resources. IntelliQuick also argued that district courts have inherent authority to dismiss cases subject to arbitration. Justice Sotomayor, writing for the unanimous Court “[e]ven assuming district courts have this inherent authority, ‘the inherent powers of the courts may be controlled or overridden by statute or rule.’ Section 3 [of the FAA] does exactly that.” The plain language of the FAA “overrides any discretion a district court might otherwise have had to dismiss a suit when the parties have agreed to arbitration.” Moreover, staying a case rather than dismissing it would allow a party to not have to restart the legal process by filing a new complaint post-arbitration to settle issues arising out of arbitration, thereby saving additional legal fees they would’ve otherwise incurred, the Court said. Sotomayor reiterated in the ruling that keeping the suit on the docket “comports with the supervisory role that the FAA envisions for the courts.” It “makes good sense in light of this potential ongoing role, and it avoids costs and complications that might arise if a party were required to bring a new suit and pay a new filing fee to invoke the FAA’s procedural protections,” the opinion said. “District courts can, of course, adopt practices to minimize any administrative burden caused by the stays that” Section 3 requires. The case may have unintended consequences for workers attempting to challenge the enforceability of mandatory arbitration agreements. Such agreements are commonly used by companies to handle employment disputes because the process resolves cases quicker and with reduced expense. Some employee advocates prefer courts to arbitration because of the perception that the judicial system provides private citizens and consumers with more options and are less likely to side with the companies being sued. Now, however, if a case is stayed pursuant to this ruling, it cannot be appealed since it is not a final ruling, and the parties must go through arbitration before being able to challenge the determination that the dispute is subject to arbitration in the first place. Sotomayor noted Congress had made clear in Section 16(b) of the statute that an order compelling arbitration is not immediately appealable, therefore dismissal when a party requests a stay would trigger the right to appeal where Congress sought to forbid one. Sotomayor wrote that staying a case makes more sense for the “supervisory role” intended for the courts, and by keeping a case on the court’s docket, a judge can assist throughout arbitration. Jennifer A. Shoemaker is a Partner in Underberg & Kessler LLP’s Litigation, Labor & Employment, and Family Law Practice Groups where she represents private and public-sector clients in a wide variety of litigation and employment matters. She can be reached at jshoemaker@underbergkessler.com. Reprinted with permission from The Daily Record and available as a PDF file here.

We are pleased to announce that Kyle C. Pittman has joined the Firm as an Associate in the Real Estate & Finance Practice Group. Kyle represents clients in the purchase, sale, and mortgage financing of real property. He negotiates agreements, conducts due diligence, reviews real estate titles, and works closely with clients to ensure all transactions are completed in a timely and efficient manner. As a former assistant Appellate Court attorney in the New York State Supreme Court, Third Judicial Department, Kyle has hands-on experience drafting legal documents, researching and evaluating complex legal issues, and finalizing cases for court review. Kyle earned his B.A., magna cum laude, from SUNY Brockport and his J.D. from Albany Law School.

If you like your gas-powered car or truck, you cannot keep it according to the Biden Administration’s final Clean Air Act vehicle emission rules. On April 12, 2023, the Environmental Protection Agency (“EPA”) issued a proposed rule for carbon dioxide emissions that limits the amount generated by cars and trucks from 2027 through 2032. On March 20, 2024, EPA finalized the rules for Model Year 2027 and later light and medium-duty vehicles.   In order to meet the standards, electric vehicles (“EV”) will need to account for two-thirds of car and light truck sales by 2032. This mandate is even more aggressive than President Biden’s August 2021 Executive Order that set the lofty goal of having 50% EV sales by 2030. Based on the 2021 EPA standards, EPA’s emission standard was a grams/mile of CO2 equivalent of a fleet average of 161 g/m for the 2026 model year. By comparison, EPA’s new proposed vehicle standard sets an emission limit of 152 g/m for 2027 cars and trucks. The standard escalates each year until the 2032 period when the limit is 85 g/m. To meet the 2032 goal, standard vehicles would be required to meet a fuel economy standard of around 100 miles per gallon.   Although EPA is attempting to use the Clean Air Act emission limits to regulate emissions, this rule will effectively force US automakers to phase out gas-powered vehicles and produce EVs. Currently, EVs only account for around 6% of vehicle sales, so it is difficult to imagine how automakers, or the country will be able to transition to meet EPA’s mandates in the next decade, particularly considering slow sales and reluctant consumers.   As we have reported in prior articles, there are also significant issues in transitioning to large scale EV use by US consumers and businesses. Despite massive comments on the proposed EPA rule, they apparently did not deter the Biden Administration and EPA in setting car and truck emission standards that will be incredibly expensive and disruptive for citizens.   First, EVs are substantially more expensive than gas-powered vehicles ranging from 10% to 40% more. In an attempt to offset expense concerns, EPA has suggested that the rules are feasible due to limited per-vehicle technology costs of $1,200 for light-duty vehicles and subsidies and tax credits under the Inflation Reduction Act of up to $7,500 for the purchase of a new plug-in hybrid or battery EV. Even accounting for the subsidies, the Energy Information Administration recently forecast that EVs will only make up 15% of sales in 2030 and 19% in 2050. The report also noted that although EVs are popular among luxury cars, they “remain less competitive against conventional gasoline-powered cars and light trucks serving the mass market.”   The US electrical grid currently does not have sufficient capacity to charge an EV car and truck fleet even if consumers transition to the level of EV use mandated under EPA’s new rules. The EV market is about 5% of the current auto market or 1.17 million vehicles. By 2032, to meet EPA’s emission standards approximately 27 million EVs will be required. Residential neighborhoods do not have sufficient electrical capacity to sustain large-scale EV charging during peak night-time hours. Presently there are approximately 4 million charging stations. To serve the needs of 27 million EVs by 2030, the country would need approximately 35 million charging stations. Who is going to build and pay for the electrical infrastructure necessary to create that number of charging stations in the country?   In addition, the massive spike in charging stations will require a huge amount of electrical grid capacity that does not presently exist. Without a massive expansion in the nation’s power grid, adding millions of EV charging stations will severely tax the US electrical grid. Notably, states such as New York, California and Texas presently operate at around 90-95% grid capacity. The summer cooling season causes many states to max out available capacity and states such as Texas and California have seen brown-outs and blackouts. Without massive changes to the electrical grid, the country could be subject to significant blackouts like California and Texas experience.       Finally, the Biden Administration EV mandate fails to account for international security and energy independence to protect the interest of US citizens and businesses. As we have reported in this column previously, EVs require lithium, copper, and cobalt for battery manufacturing. The vast majority of these minerals are mined in areas of the world that are not friendly to US interests. Significantly, China and Chinese-owned state industries have taken steps to acquire control of mining and processing companies that control the precious metals necessary for EV production. There are 19 cobalt mines in the Congo and 15 are controlled by the Chinese government or entities. Based on recent tensions with China, it makes little strategic sense for the Biden Administration to mandate US companies and consumers become further dependent on Chinese-controlled materials to meet an emission standard that can only be attained through transformation to EV use.     Reactions to the proposed rule have been quite stark. In announcing the final rule, EPA Administrator Michael S. Reagan said that ‘[w]ith transportation as the largest source of U.S. climate emissions, these strongest-ever pollution standards for cars solidify America’s leadership in building a clean transportation future and creating good-paying America jobs, all while advancing President Biden’s historic climate agenda.” Environmental groups have lauded the final rule.  Abigal Dillen, President of Earthjustice stated that “[t]he Environmental Protection Agency has taken a major step forward to clean up tailpipe pollution and address the climate crisis by accelerating the essential transition to clean cars and trucks. These standards make clear what we already know:  the future of cars is electric. And there is more work ahead to clean up pollution and modernize our transportation sector.”   The Competitive Enterprise Institute’s Center on Energy and Environmental called the new emission rules “one of the most extreme rules ever finalized by a federal agency.” David Holt, President of Consumer Energy Alliance said “[i]t is disappointing that the Biden Administration continues to be actively working against its stated goal of ‘equipping the American middle class to succeed. While electric vehicles clearly have a role in our vehicle mix, the middle class cannot succeed with the EPA forcing an unworkable, expensive EV quota on working class families. State mandates have not led to widespread public adoption of EVs-sales are actually in decline.”      The proposed EPA rule is already being challenged in the courts on various grounds. A group of twenty-five attorney generals filed a proceeding against the final rules.  Kentucky’s Attorney General Russell Coleman said “The Biden Administration is willing to sacrifice the American auto industry and its workers in service of its radical green agenda. We just aren’t buying it. Demand for EVs continue fall, and even those who want to buy a car can’t afford it amid historic inflation.” The challenge was filed in the United States Court of Appeals for the D.C. Circuit and alleges that the rule exceeds the EPA’s lawful authority and is arbitrary and capricious, mandating that it be vacated.    The Biden Administration’s self-pronounced war on fossil fuel has now taken a huge leap with the EPA’s final vehicle emission rules that will require two-thirds of all vehicles to be EVs by 2032. Americans would be well served to educate themselves on EPA’s actions and vote like their freedom, safety, and lifestyle depend on election outcomes.         George S. Van Nest is Partner in Underberg & Kessler LLP’s Litigation Practice Group and chair of the firm’s Environmental Practice Group. He focuses his practice in the areas of environmental law, development, construction, and commercial litigation. Reprinted with permission from The Daily Record  and available as a PDF file here .

The New York State Budget was passed in late April 2024 and includes new duties for employers regarding employees expressing breast milk and needing time off for prenatal care. Employees expressing breast milk will receive a new thirty (30) minute paid break each workday and will be able to use existing paid break time or mealtime if more than thirty (30) minutes are needed. Employees can use this new benefit whenever reasonably needed for up to three (3) years following childbirth. Employees using this benefit are specifically protected from discrimination and retaliation by this new law, part of the amended subdivision 1 of Section 206-c of the New York Labor Law, which takes effect on June 19, 2024. Employers remain obligated to follow existing provisions of 206-c that a suitable location for expressing breast milk in the workplace be created and that notice of the law be provided at the time of hire, to mothers returning to work following the birth of a child, and annually. Paid prenatal care is also now required as part of Labor Law Section 196-b, the New York Paid Sick and Safe Leave Law. The new law grants pregnant employees a separate, additional twenty (20) hours of paid leave for prenatal care during any 52-week period. Pregnant employees getting physical examinations, medical procedures, monitoring, testing, discussing their pregnancy with a health care provider, or receiving any other health care services related to the pregnancy may use the paid prenatal leave. The leave must be taken in hourly increments, is paid at the employee’s regular rate of pay, and any unused portion of the twenty (20) hours need not be paid out at the termination of employment. Employers are limited in the documentation they can request from employees about prenatal care and like the new expression of breast milk law, employees using the paid prenatal care benefit may not be discriminated or retaliated against for doing so. If you have any questions about these new obligations or any Labor or Employment law issues, please contact Paul F. Keneally at 585-258-2882 or pkeneally@underbergkessler.com.

We are pleased to announce that Ericka B. Elliott, associate attorney in the Health Care and Litigation Practice Groups, has been selected as a finalist in the 6th Annual Greater Rochester Chamber IGNITE Award’s program. The IGNITE Award celebrates Greater Rochester’s best and brightest young leaders. The program honors young professionals between the ages of 21 to 35 years who strive toward the highest level of personal and professional accomplishment, excel in their chosen field, and devote time and energy to their community. This year, the IGNITE Award Selection Committee picked twelve finalists based on the award criteria and supporting documentation provided in the application package. The award will be presented at a ceremony at Locust Hill Country Club on Thursday, June 6, 2024. In her commercial litigation practice, Ericka helps small businesses, banks, and individuals with contract disputes, debtor/creditor issues, and corporate governance matters. She also represents hospitals, physicians, nursing homes, home health agencies and other health care providers on issues ranging from risk management and patient care to collections and regulatory compliance. In addition, Ericka has experience representing town and village boards on governance, the legislative and administrative process, economic development, planning, zoning, and litigation related to those areas. She earned her B.S. from Cornell University and her J.D. from University at Buffalo School of Law. Ericka is a member of the New York State Bar, the Monroe County Bar Association (MCBA), and the Greater Rochester Association for Women Attorneys (GRAWA), where she is a Board member and Secretary. In 2023, she was selected to participate in MCBA’s inaugural class of The Leadership Academy and now serves on the Steering Committee for the Academy. She is an active member of several non-profit Boards of Directors, including Lifespan, St. Ann’s Foundation, and the WNY Rural Area Health Education Center. She is also a Board Member and current President for 13thirty Cancer Connect, serves on the Lima Joint Village/Town Planning Board, and is a volunteer with the Cornell Alumni Admissions Ambassador Network.

We are pleased to announce that David M. Tang, a partner in the Firm’s Health Care, Litigation, and Creditors’ Rights practice groups, has been named the winner of the 4th Annual Justice Ruth Bader Ginsburg Vanguard Award by the New York State Bar Association Trial Lawyers Section. He received the award during a New York State Bar Association (NYSBA) virtual ceremony and CLE program held on October 3, 2023. The award, named in honor of the trailblazing Justice Ruth Bader Ginsburg, is presented to a trial attorney who has made extraordinary efforts in addressing and raising awareness about issues of equity, diversity, and inclusion. To qualify for the award, nominees need to practice substantially as a trial lawyer in state (or federal) courts in New York State, demonstrate a commitment to diversity and inclusion in the legal profession, and make an impact on the legal community by being a better ally and advocate through mentoring and providing opportunities to others. David represents and advises clients in business, health care, restructuring, and commercial litigation matters. At Underberg & Kessler, he serves as chair of the Health Care and Creditors’ Rights practice groups, and co-chair of the Diversity, Equity, Inclusion and Belonging Committee. “David is a worthy winner of the Ruth Bader Ginsburg Vanguard Award,” said Richard Lewis, president of the NYSBA. “He is dedicated to promoting awareness of issues relating to diversity, equity, and inclusion at his firm, in his county bar association, and through his active board service. His clients and colleagues agree that he brings care and attention to everything he does – including his efforts to diversify and mentor the next generation of lawyers and to help his local community.” In his nomination letter, Underberg & Kessler managing partner Thomas F. Knab wrote, “David’s commitment to diversity in the legal profession, through his roles as past chair of the Monroe County Bar Association’s Diversity Committee and with mentoring programs such as Lawyers for Learning and the Law Explorers Mock Trial Team at School Without Walls, is indicative of the kind of passion he brings to his work and his willingness to invest his time and energy into worthy causes.” David, who earned his B.A. from Cornell University and his J.D. from Syracuse University College of Law, is active in several charitable organizations, consistently lending his leadership in many ways. He is the chair of the board of WXXI Public Broadcasting Council and The Little Theatre, chair of the St. John’s Foundation, a former trustee of the Monroe County Bar Association and a former director on the boards of the Center for Dispute Settlement and Providence Housing Development Corporation, which supports affordable housing in the Finger Lakes region. In his acceptance speech, David encouraged his colleagues to engage in equity and inclusion work, to continue to invest in others and to guard against the fatigue that sometimes sets in when facing the significant challenge of diversity work. He also shared a quote from the late Justice Ginsburg as a guiding principle, “Fight for the things you care about, but do it in a way that will lead others to join you.” For more information about the 4th Annual Justice Ruth Bader Ginsburg Vanguard Award, click here to view the NYSBA website.

We are pleased to announce that Ericka B. Elliott, associate attorney in the Health Care and Litigation Practice Groups, has been appointed to serve on the Board of Directors of St. Ann’s Foundation. For more than 150 years, St. Ann’s Community has promoted highest levels of independence, and physical and spiritual well-being of older adults in the Catholic tradition of excellence in care and services. It offers a complete range of services for senior adults, including retirement living, rehab/transitional care, assisted living, memory care, nursing home care, wound care, hospice care, and adult day services. St. Ann’s Foundation raises resources to enhance programs and services for St. Ann’s Community. In her commercial litigation practice, Ericka helps small businesses, banks, and individuals with contract disputes, debtor/creditor issues, and corporate governance matters. She also represents hospitals, physicians, nursing homes, home health agencies and other health care providers on issues ranging from risk management and patient care to collections and regulatory compliance. In addition, Ericka has experience representing town and village boards on governance, the legislative and administrative process, economic development, planning, zoning, and litigation related to those areas. She earned her B.S. from Cornell University and her J.D. from University at Buffalo School of Law.

Governor Kathy Hochul approved the Fiscal Year 2025 New York State Budget on April 20, 2024. One of the key budget components impacting employee leave includes sunsetting the New York State COVID-19 paid sick leave. The paid leave obligation will now end on July 31, 2025, extending a year beyond the initial proposal to end the law July 31, 2024. Many employers have been frustrated with NYS’s COVID-19 paid sick leave since it was passed four years ago. Some are upset with employees taking COVID sick pay for the second or third (maximum) time and others believe the job-protected COVID sick pay days (up to 5 or 14 depending on employer income/size) are not necessary given the NYS general sick pay required (40 or 56 hours per year for employers with 5 or more employees or a net income over $1M), and the paid time off/sick pay they voluntarily provide. Part of the Governor’s reasoning for proposing the end of the COVID-19 paid sick leave law is the existence of NYS general sick pay and that the new Centers for Disease Control and Prevention guidance on return to work from COVID has changed significantly. Those infected with COVID are now cleared to return to work when symptoms are improving, and any fever is gone without the use of fever-reducing medications. Moreover, the Governor has included expansions of leave for medical issues and disability (first 12 weeks increased over 5 years to match the 2/3 pay of paid family leave) in the budget, which may apply to employees with COVID in the future. Finally, there was some confusion regarding how COVID sick pay law would apply to new employers. If you have any questions regarding this or any other Labor & Employment law topic, please call Paul F. Keneally at (585) 258-2882 or email pkeneally@underbergkessler.com.

On April 23, 2024, the Federal Trade Commission (“FTC”) issued a new rule banning nationwide most non-compete agreements for workers. Although court challenges are anticipated that could delay or preclude enforcement of this new rule, it is currently set to become effective 120 days after publication in the Federal Register. The new rule defines a “non-compete clause” as “a term or condition of employment that prohibits a worker from, penalizes a worker for, or functions to prevent a worker from (i) seeking or accepting work in the United States with a different person where such work would begin after the conclusion of the employment that includes the term or condition; or (ii) operating a business in the United States after the conclusion of the employment that includes the term or condition.” The rule further provides that, for its purposes, “term or condition of employment” includes, but is not limited to, a contractual term or workplace policy, whether written or oral. At its core, the new rule provides that it is an unfair method of competition – and therefore a violation of Section 5 of the FTC Act – for employers to enter into a non-compete clause, to enforce (or attempt to enforce) such a clause, or to represent that a worker is subject to non-compete prohibitions on or after the rule’s effective date. The FTC adopted a slightly different approach with respect to “senior executives.” Under the rule, “senior executives” are defined as individuals in a policy-making position with a total annual compensation of at least $151,164 in the preceding year (inclusive of salary, commissions, and other nondiscretionary compensation, such as bonuses). With respect to existing non-competes with senior executives (i.e., non-competes entered into before the rule’s effective date), existing non-competes can remain in force; the final rule does not cover such agreements. However, employers cannot enter into new agreements with senior executives, and, similar to other workers, cannot attempt to enforce or represent that a senior executive is subject to a non-compete clause, after the effective date. To be compliant with the new rule, employers must provide workers with written notice that their existing non-compete clauses are no longer enforceable. The FTC has provided model language for the written notice requirement. Importantly, the new rule does not apply where a cause of action related to a non-compete accrued prior to the effective date. The rule also does not apply to non-competes entered into pursuant to a bona fide sale of a business entity. Finally, reasonable non-solicitation agreements will remain enforceable. As noted above, the new rule will become effective 120 days after the FTC publishes it in the Federal Register. Covered employers have until the effective date to come into compliance with the rule. There is a strong likelihood that the ultimate enforceability of the rule will be challenged in district courts, which itself could result in a temporary restraining order or preliminary injunction delaying the rule’s effectiveness. Notwithstanding, employers should begin to compile lists of existing non-compete agreements in anticipation that the rule in its current form is upheld. If you have any questions regarding this article, please contact the Underberg & Kessler attorney who regularly handles your legal matters, or Ryan T. Biesenbach at (585) 258-2865 or rbiesenbach@underbergkessler.com.

Since the onset of the COVID-19 pandemic in 2020, the number of workers performing services as independent contractors in the United States has risen.  In response, some states have stepped up efforts to reign in potential abuses of these arrangements by employers.  New York is no exception. In November 2023, Governor Kathy Hochul signed new legislation S.5026/A.6040, known as the “Freelance Isn’t Free Act” (“the Act”), which establishes new protections for independent contractors, as well as means for the Attorney General, the Department of Labor, and individual independent contractors to enforce its provisions.  The Act, which will take effect on August 28, 2024 ( originally planned for May 20, 2024 ), amends the New York Labor Law by adding Section 191-d, which governs the relationship between a “hiring party” and “freelance worker.”  A hiring party is any person, other than a governmental entity, who retains the services of a freelance worker.  A freelance worker is “any natural person or organization composed of no more than one person . . . that is hired or retained as an independent contractor  to provide services in exchange for an amount equal to or greater than $800, either by itself or when aggregated with all contracts between the hiring party and [independent contractor] during the immediately preceding one hundred twenty days.” The Act exempts four categories of workers: (1) sales representatives, (2) lawyers in good standing engaged in the practice of law, (3) licensed medical professionals, and (4) “construction contractors” as defined in § 191-d (a). Importantly for employers, Section 191-d contains three new mandates that an employer must heed.  When hiring a freelance worker, New York employers must now: (1) enter a written contract containing certain provisions, (2) timely pay the agreed-upon wages, and (3) abstain from retaliating against an independent contractor who exercises his or her rights.  A failure to follow any of these mandates could be an expensive mistake. The Act provides that an independent contractor may bring a cause of action in any New York Court based upon a violation of Section 191-d’s provisions.  Thus, the new law increases the potential that an employer who retains an independent contractor will be subject to litigation and its attendant expenses.  Further, in the event the independent contractor prevails in that litigation, the employer may be liable to pay statutory damages and attorneys’ fees.  To avoid costly litigation and an expensive damages award, employers must take note of the Act’s new requirements. Necessity of a Written Contract New Labor Law Section 191-d (3)(a) provides that a hiring party must enter into a written contract with the independent contractor.  The Act further mandates that those contracts contain four provisions: (1) the names and addresses of the hiring party and independent contractor, (2) an itemization of all services to be provided, the value of those services, and the method for calculating the independent contractor’s compensation, (3) the date on which the independent contractor will be paid, or the mechanism for determining that date, and (4) the date by which the independent contractor must provide a list of services rendered to the hiring party.  There may be more required contractual clauses coming soon, as the Act authorizes the Department of Labor to adopt rules requiring additional mandatory terms.  Thankfully for employers, the new law requires the Department of Labor to provide model contracts for use by the public at no cost.  The model contracts will be published on the Department of Labor’s website when available. If the employer fails to offer a written contract or include the necessary terms, it will be liable to pay a $250 statutory penalty.  If a violation of subsection three is the only violation alleged by an independent contractor, such worker must prove that he or she requested a written contract.  However, any violation of subsection three and any other provision of Article 6 of the Labor Law may subject the employer to damages equal to the amount of the underlying contract.  Wages Must Be Paid on Time Perhaps the most important new requirement of the Act for employers is the mandate that hiring parties pay independent contractors in a timely manner. “Timely” means that an employer pays the wages due on the date specified in the written contract or, if the contract does not specify such a date, “no later than thirty days after the completion of the freelancer’s services under the contract.”  It is critical that employers pay independent contractors pursuant to the contract’s terms because the penalties for failing to do so may be severe.  A hiring party who fails to pay an independent contractor in a timely manner is subject to a statutory damage award of double damages, i.e., double the amount owed to the worker, plus  the attorneys’ fees incurred by the independent contractor.  Given the expense of litigation, the employer could be liable for tens of thousands of dollars in damages if it does not pay an independent contractor’s wages when due. Discrimination and Retaliation Prohibited The Act also extends protections to independent contractors who exercise, or attempt to exercise, any of their rights under its provisions.  Specifically, the Act forbids a hiring party from taking any action that penalizes an independent contractor for, or is reasonably likely to deter an independent contractor from, taking advantage of his or her rights under the Act.  A violation of that section will expose the hiring party to a statutory damages award “equal to the value of the underlying contract for each violation.”  Repeat Violations Finally, the new Act establishes penalties for hiring parties who repeatedly flaunt its provisions.  The law empowers the New York Attorney General to commence a civil action against a hiring party where there is reasonable cause to believe that the hiring party has engaged in a “pattern or practice of violations” of Section 191-d.  If the trier of fact in such proceeding determines that a pattern and practice of violations has been proved, it may fine the offending hiring party up to $25,000.  Such a fine may be imposed in addition to any damages that may be awarded to the independent contractor in a civil action based on the same facts.  Accordingly, New York State employers who hire independent contractors should familiarize themselves with the provisions of the new “Freelance Isn’t Free Act” before they take effect in August 2024.  The failure to do could be a costly mistake.   Matthew M. Simmonds is Senior Counsel in Underberg & Kessler LLP’s Litigation Practice Group.  A former Appellate Court attorney in the New York State Supreme Court, Fourth Judicial Department, and the Florida First District Court of Appeal, Matt has handled thousands of cases in nearly every area of civil and criminal law.  He can be reached at msimmonds@underbergkessler.com . Reprinted with permission from The Daily Record  and available as a PDF file here .

Underberg & Kessler Managing Partner, Patrick L. Cusato, was recently featured in the Rochester Business Journal article "New leader takes helm at Underberg & Kessler, leads new strategic plan." The article (reprinted with permission, PDF file here.) highlights Pat's leadership role, his work as Chair of the Real Estate & Finance Practice Group, and his commitment to clients and organizations championing the real estate industry. New leader takes helm at Underberg & Kessler, leads new strategic plan Patrick L. Cusato is the new managing director at Underberg and Kessler LLP. “It’s been a busy three months. I’ve been in management here for a while, so a lot hasn’t changed. But there are other things that come with the position,” said Cusato, who moved into the leadership role Jan. 1. Cusato has been on the firm’s management committee for 15 years, but as managing partner he will chair the committee and run all the management meetings. About four years ago, Cusato became the financial partner on the management team. Cusato, who has been with the firm since 1987, took over from Thomas F. Knab, who was Managing Partner for two years. Before that, Anna E. Lynch was Managing Partner for 17 years. As Managing Partner at the 28-attorney firm, Cusato oversees everything from day-to-day operations to finance to technology, while simultaneously working with the practice group leaders. “The big thing we’re getting into is updating our strategic plan,” said Cusato, noting that the firm prepares long-term outlooks for one, three, five and even 10 years. Meanwhile, Cusato expects to carry the same caseload. “I do A-to-Z in real estate transactions and finance transactions — everything from basic house closings to very sophisticated low-income housing tax credit deals. I do a lot of affordable housing work,” he said. Paul F. Keneally, a Partner at Underberg & Kessler, said Cusato is “an incredibly intelligent real estate lawyer.” “He’s really passionate about getting the best service and results for the clients in all their different real estate matters,” Keneally said. “He’s super practical, very focused on the task at hand, with a very efficient manner, and not a lot of hyperbole or wasted effort or extra work that the client doesn’t need.” Katherine H. Karl, a Partner at Underberg & Kessler, described Cusato as “a very loyal, smart, hard-working, dedicated professional.” “I can’t think of anybody who knows the firm better or works harder than Pat does … If he’s involved with something, he’s very often in a leadership role,” she said. “He masters a subject and then shares the knowledge he has in the community and often speaks and puts together panels or shares his experience in any number of real estate topics. In particular, he’s very passionate about trying to assist with a real shortage of affordable housing. “Instead of wringing his hands about it he brings people together and spends a lot of time trying to collaborate with other people and agencies that have similar kinds of goals,” she said. Cusato is vice president of the Bishop Sheen Ecumenical Housing Foundation Board of Directors. He is a past president of the Foundation, past chair of the Project Development Committee and past chair of the Foundation’s annual fundraising gala. He is also an executive board member of the Mortgage Bankers Association of the Genesee Region, and he advises the board on legislative developments. Cusato is on a task force that includes representatives of the real estate industry, such as the Greater Rochester Association of Realtors, the Mortgage Bankers Association of Greater Rochester and the Rochester Home Builders Association. The group has produced a report outlining the issues involved in the housing shortage and is attempting to get the attention of politicians and local leaders to support the construction of more affordable housing. Last month, there were only 260 houses for sale in all of Monroe County, but 10 years ago the number was 2,600, Cusato pointed out. High interest rates are just one factor that impacts the housing market. Changing government regulations and building codes are becoming a more significant influence Cusato said. The initiative to find and implement solutions to the housing shortage has been branded as Re-imagine ROC Housing. Another part of this initiative is to encourage municipalities to embrace affordable housing. Cusato helped organize an effort with developers to counter the opposition to affordable housing and new senior citizen housing. “Do you not understand seniors are stuck in their homes? They want to go somewhere maintenance free,” he said. “They want to go somewhere it’s going to be cheaper for them to live. They can’t afford to take care of the house anymore and that house is no longer fully on the tax rolls because they’re getting all kinds of exemptions. “Let them move somewhere that’s affordable. The property goes on the market and an individual or a family buys it, and it goes fully back on the tax rolls,” he added. Part of Cusato’s duties include leading the firm’s strategic planning. The process starts with data showing which practices areas are the most profitable and developing methods for handling those matters more efficiently. “We’re going to match that with how we want to market and develop some of these items that are more productive for us and whether we have the right technology to do that, and do we have the right employees,” he said. In the coming years, the firm will have to deal with a changing labor market, he said. He said law firms are facing the retirement of a lot of seasoned attorneys while it’s not clear if there will be enough young talent coming out of law schools to replace them. “It seems like eventually there will be a shortage. While there are still tons of people going to law school, not as many are choosing the day-to-day practice of law. They are finding in-house positions or using that law degree to do other things,” Cusato said. As a result of the financial crisis of 2008, there was a big migration of lawyers out of the big cities, but that has trailed off, he said. The trend picked up again during the COVID pandemic. “We picked up a very talented attorney who was originally from Webster who was working in Manhattan and had enough about nine months into COVID and started looking for jobs up here,” he said. Another new attorney at the firm, originally from Rochester, is moving back after working downstate, Cusato said. He believes many young lawyers will spend a few years in a big city at a large law firm and eventually work their way back to a smaller market, such as Rochester, often because barely 10% of the associates at those large firms become partners. He also sees technology as continuing to play an important role in the legal profession, within limits. “Technology is a fantastic tool, and you can do things faster and easier. Clients don’t always want to interface with you over technology, whether it’s email or other things. The personal touch is still very, very important to clients,” he said.