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NY Governor Signs Employee Misclassification Act into Law

October 29, 2010

As we reported in a recent Anaheim, California employment lawyer blog, in the state of New York, Governor David Paterson signed the Construction Industry Fair Play Act into law this week, to target employee misclassification within the construction industry. Under the new act, any contractor who knowingly misclassifies an employee will be subject to criminal and civil penalties.

The law states that individual workers who perform services for an employer are presumed to be employees unless they are proven to be an independent business entity, by meeting certain criteria. The law also contains a test with twelve parts to determine whether an employer is considered a "separate business entity" from the contractor for which it provides a service.

According to a recent press release from Governor Paterson, studies show that employers misclassify around 15 to 25 percent of New York State construction workers as independent contractors or "exempt." As our Carson labor attorneys have reported in a previous blog, employee misclassification can happen as a result of incorrectly labeling employees as independent contractors or by paying them entirely off the books--denying the workers' benefits and protections under state and federal law. This not only hurts employees, but it deprives the government of tax revenue, and is unfair to employers who play by the wage and hour rules and regulations, by classifying their workers correctly.

Paterson showed evidence of employment misclassification on a recent construction site in New York State, where 12 of the reported 21 contractors claimed to have 211 employers who were classified correctly as independent contractors. By incorrectly classifying these workers, the employers violated the law by neglecting to pay over $80,000 in unemployment insurance taxes. On the same site, a painting contractor had more than 50 painters who were reportedly misclassified as independent contractors.

In another construction site, a group of misclassified workers reportedly worked for over three weeks with no compensation, and were then fired from their jobs, with no money to return back to their homes in North Carolina. Another crew worked for three months for no compensation, except for receiving housing in an apartment, and some food.

Paterson claims these are not incidents that are isolated, and that employee misclassification robs workers of vital benefits like overtime pay and unemployment insurance, and takes away government tax revenue at a time when it is much needed.

Governor Paterson hopes that this law will clean up this employment practice, buy providing clear guidelines to distinguish employees from independent contractors, and for imposing criminal and monetary penalties for the first time in State history, on construction industry employers who engage in employment misclassification.

In cities throughout Orange County, California and Southern California, contact Howard Law, PC today for employment misclassification issues in the workplace.

Governor Paterson Signs the Construction Industry Fair Play Act, New York State Department of Labor, September 03, 2010

State to Construction Industry: Now is the time to "Play Fair" With Your Workers, New York State Department of Labor, October 26, 2010

Related Web Resources:

Department of Labor (DOL): Wage and Hour Division (WHD)

New York Department of Labor