Enacts the "New York state construction industry fair play act"

Summary of specific provisions

Section 1 of the bill creates a new Article 25-A of the Labor Law to be known as the New York state construction Industry Fair Play Act with the following sections:

* Section 861 contains the short title of the Article. * Section 861-a contains a declaration of legislative findings. * section 861-b creates definitions. * Section 861-c creates a presumption of employment status in the construction industry. * section 861-d requires that a notice of employee rights and penalties for misclassification be conspicuously posted at the worksite. * section 861-e establishes a violation and penalties for improper employment classification. Section 861-f estab- lishes retaliation as a violation of the Act.

Section 2 of the bill amends section 511 of the unemployment insurance law to include the presumption of a construction worker as an employee.

Section 3 of the bill amends section 2 of the workers' compensation law to include the presumption of a construction worker as an employee.

Section 4 of the bill requires that the presumption of employment in the construction industry shall be used for all determinations of employment status of construction workers under the labor law and workers' compen- sation law.

Section 5 establishes the effective date of the Act.

Existing law

There is no statute in New York that establishes a presumption of employment status for work in the construction industry.

Justification

Misclassification is a type of payroll fraud in which an employer improperly classifies a worker as an independent contractor rather than as an employee. Misclassification hurts workers, employers, and taxpay- ers. Workers are denied basic protections and benefits, including unem-

ployment, workers' compensation and disability benefits, and are forced to pay the employer's share of social security and Medicaid costs which unfairly enriches the employer and reduces the worker's take home pay. Misclassification also creates an unlevel playing field for law-abiding employers who must compete against businesses that intentionally submit lower bids by misclassifying their workers.

Misclassification additionally impacts taxpayers by reducing the amount of unemployment taxes, personal income taxes and workers' compensation funds collected by the State. Reports by the Joint Enforcement Task Force on Employee Misclassification, the Cornell University School of Industrial and Labor Relations and the Fiscal policy Institute have all found that misclassification is causing the state to lose millions of dollars in tax revenues each year. Investigations by the Joint Task Force of upstate and downstate construction firms found over $86 million in unreported wages, which resulted in the assessment of over $2.5 million in unpaid unemployment taxes and over $1 million in unemployment insurance fraud penalties. A 2001 Cornell report for the period of 2002-2005 found $4 billion in unreported wages and $115 million in lost unemployment taxes affecting more than 45,000 construction workers. The Fiscal Policy Institute has reported that for the construction industry in 2005 for New York city alone, the loss of unemployment, personal income and ether payroll taxes totaled $342 million, plus an additional $148 million in health care costs shifted onto workers, taxpayers and other employers that provide health insurance. This total was expected to reach at least $551 million in 2008. The failure to pursue employers who misclassify their workers has the effect of condoning tax evasion, increasing the number of misclassified workers, and supporting the underground economy instead of the State treasury.

New York State's construction industry is experiencing dangerous levels of employee misclassification fraud. Recent studies of New York City's construction industry found that nearly one in four construction workers are either misclassified as independent contractors or are employed by construction contractors completely off the books. Throughout the State, unscrupulous employers are intentionally reporting employees as inde- pendent contractors to state and federal authorities or workers' compen- sation carriers in record numbers. Several other states use the presump- tion established under the bill to determine employment status in the construction industry. This legislation will strengthen the enforcement of labor violations against employers who cheat the government and deny construction workers the prevailing wages benefits and other protections they are entitled to receive under state and federal law.

Prior legislative history

New bill.

Fiscal implications

Significant savings for the state are expected from the increased payment of workers' compensation premium assessments and unemployment taxes for the Unemployment Insurance Trust Fund.

Effective date

This act shall take effect on the sixtieth day after it shall have become law.