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

Title of bill

An act to amend the labor law, in relation to enacting the "New York state construction industry fair play act"; and to amend the state finance law, in relation to creating the construction industry classification fund

Purpose or general idea of the bill

This legislation would amend existing provisions of law related to the payment of workers in order to combat misclassification fraud by employers in the construction industry. The bill would create a presumption of employee status unless an employer met specific criteria for classifying a worker as an independent contractor and would establish penalties for classification violations.

Summary of provisions

The bill creates new Article 25-A known as The New York State Construction Industry Fair Play Act. 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 notice be provided to workers of employment status. Section 861-e establishes violations of the article. Section 861-f establishes enforcement and penalties for violations. Section 861-g creates an advisory committee on construction industry classification. Section 861-h establishes retaliation as a violation of the Act. Section 99-t of the of the state finance law establishes the construction industry classification fund.

Justification

Misclassification is a type of employer payroll fraud in which an employer improperly classifies a worker as an independent contractor rather than an employee. Misclassification hurts workers, employers, and taxpayers. Misclassification hurts workers by denying workers protections and benefits that they are entitled to, shifting healthcare costs to workers, and forcing workers to pay the employer's share of Social Security and Medicaid costs, enriching the employer by its noncompliance and reducing the worker's take-home pay. Misclassification hurts employers by creating an un-level playing field that causes law-abiding businesses to suffer unfair competition from competitors who intentionally submit lower bids by misclassifying their workers. Misclassification hurts taxpayers by reducing the amount of unemployment and workers compensation funds collected by the state. The failure to pursue employers who misclassify their workers has the effect: of condoning tax evasion and increasing the number of misclassified workers.

New York State's construction industry is experiencing dangerous levels of employee misclassification fraud. Recent studies of New York City's construction industry suggests that as many as 50,000 New York City construction workers-nearly one in four--are either misclassified as independent contractors or are employed by construction contractors completely off the books.

Unscrupulous employers are intentionally reporting employees as independent contractors to state and federal authorities or workers compensation carriers in record numbers. It is estimated that each year nearly $150 million in health care costs are shifted to employees, taxpayers, and honest employees. In addition, over $4 billion in taxable wages are underreported due to misclassification, resulting in an underreporting of over $175 million in unemployment tax. Because of the lost payroll taxes and social insurance premium payments, the health care costs fraudulently shifted from employers to employees, and the loss of workers compensation, unemployment insurance, or temporary disability coverage for workers, this law attempts to curb this underground economy, enforce longstanding employment laws, ensure compliance with essential social insurance protections and eliminate the unfair competitive advantage from contractors in the underground economy.

Legislative history

New Bill.

Fiscal implications

None.

Effective date

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