Relates to payment of independent contractors

Summary of provisions

Section one amends the Labor Law by adding two new sections, 196-b and 169-c.

New section 196-b adds definitions for the terms "compensation," "independent contractor," "client," "construction contractor," and "construction project." These definitions apply to new section 196-b and new section 196-c.

New section 196-c provides requirements for the payment of independent contractors and remedies for independent contractors with payment disputes. This new section's requirements and remedies include:

-Requiring that independent contractors to be paid in accordance with the written agreement between the independent contractor and the client. The agreement must include the work terms, as well as a description of how compensation earned and payable is calculated. Clients must retain copies of these written agreements for six years.

- Requiring that independent contractors be compensated for their work within a reasonable amount of time, in accordance with a written agreement.

- Empowering the Commissioner of the Department of Labor to take action to pursue violations of written agreements and recoup unpaid compensation owed to independent contractors.

- Establishing the right of independent contractors to file complaints with the Department of Labor concerning contract violations.

- Requiring the Department of Labor to investigate complaints filed by independent contractors and to provide such independent contractors with a written description of the complaint processing procedure, including the investigation, case conference, potential civil and criminal penalties, and collection procedures.

- Empowers the Commissioner of the Department of Labor to determine whether a client has violated a written agreement regarding the payment of compensation. When the Department has determined that there has been a violation, the Department may issue an order directing payment of the compensation found to be due.

- Civil and criminal penalties for clients who fail to ray compensation to independent contractors.

Section two provides that this act shall take effect immediately.

Existing law

Currently, independent contractors currently do not receive the same protections under the Labor Law with regard to earned remuneration as traditional employees.

Justification

Since the original enactment of the Labor Law, composition of the workforce in New York State has changed significantly. The modern economy has led to the rise of individual workers considered "independent contractors" or "freelancers." An independent contractor, as defined by this legislation, is a sole proprietor who is not an employee and who is hired or retained by a client for an amount equal to or greater than six hundred dollars, which is the threshold for which a company or person must provide a federal Internal Revenue Service form 1099-mist to the independent contractor.

Independent contractors often participate in work alongside traditional employees, yet they are not afforded the same protections under the law as their traditionally employed counterparts. They are especially vulnerable because their compensation is not guaranteed under the Labor Law, and their main forum for relief is Small Claims Court. This bill seeks to correct the situation by amending the Labor Law to extend compensation protection to this Population of workers.

A recent survey of 3,000 independent contractors revealed that they spent 17,000 hours pursuing $3 million dollars in owed compensation. This statistic not only indicates the disproportionate burden placed on these individuals to collect payments that are rightfully theirs, it also illustrates the significant loss productivity because independent contractors are forced to spend time pursuing earned and unpaid compensation when they could be performing valuable and constructive work activity.

Legislative history

2011-2: S.4129 - Referred to Labor (Passed Assembly both years, A.6698)

Fiscal implications

To be determined.

Effective date

This act shall take effect immediately.