Includes outside captive salespersons within the definition of an "employee"

BILL NUMBER:S5016

Title of bill

An act to amend the labor law, in relation to the definition of "employee" for the purpose of the minimum wage act

Purpose or general idea of bill

To prevent employers from denying individuals due compensation, benefits, leave, training, supervision, access to facilities, or other rights and privileges due to improper classification of employees as independent contractors.

Summary of provisions

Section 1 requires that "captive" representatives, those under a contract or other binding obligation to sell products for one and only one firm, be included in the New York State definition of an employee. This is done by retaining the exclusion of outside salespeople from the definition of employee only when such individuals are under a non-captive agreement.

Section 2 effective date.

Justification

The IRS (2014) defines independent contractors as individuals "who are in an independent trade, business, or profession in which they offer their services to the general public," while noting that services cannot be said to be provided under this arrangement if they can be controlled by an employer. According to Wood (2013), the classification of employees as independent contractors has been a widespread labor practice recently investigated by the United States Department of Labor and the New York Attorney General. The Department of Labor has collected over $18.2 million in back wages from 19,000 employees who were placed in the wrong category. Other states have entered into deals with the DOL to crack down on this practice. The AFL-CIO (2014) suggests that millions of employees have been hired as independent contractors by employers in order to cut costs bypass federal antidiscrimination and collective bargaining laws, exploit undocumented laborers, or avoid having to pay for health benefits.

This practice is widespread across industries, occurring at 30 percent of firms audited by the Department of Labor; over 700,000 workers in New York could be reasonably assumed to be misclassified. In 2007, one in four New York City construction workers was estimated by the Fiscal Policy Institute to be operating under false terms. The federal government was estimated to have lost $2.72 billion due to employees filed as independent contractors in 2006 (AFL-CIO, 2014). These figures indicate that current labor laws contain glaring inadequacies which allow a significant portion of New York's labor force to fall through the cracks, often without legal recourse. Loopholes which allow individuals to be treated as employees without receiving proper benefits and protections must be closed by the legislature.

Prior legislative history

New bill.

Fiscal implications for state and local governments

Increased revenue to the state due to increases in taxable wages and unemployment insurance contributions 2002-2005 losses to New York State alone were estimated at $4 billion and $175 million respectively by a 2007 Cornell University study.

Effective date

This act shall take effect January first of the calendar year immediately following its enactment into law.