New York recently enacted the “New York State Construction Industry Fair Play Act.” Under this law, which becomes effective on October 26, 2010, a construction worker is presumed to be an employee—as opposed to an independent contractor—unless the worker is a separate business entity, as defined by the law, or the worker: (1) is free from control and direction in performing the job, both under his or her contract and in fact; (2) the service performed is outside the usual course of business; and (3) the worker is customarily engaged in an independently established trade, occupation, profession, or business that is similar to the service at issue. If all three criteria are met, the worker may be considered an independent contractor.

Employers who willfully violate the law are subject to civil penalties of up to $2,500 for the first violation and up to $5,000 for each subsequent violation within a five year period. This penalty may be assessed for each worker who is misclassified. Additionally, employers who violate the law may be guilty of a criminal misdemeanor, and subject to imprisonment for up to 30 days or a fine up to $25,000 for the first offense, or imprisonment for up to 60 days or a fine up to $50,000 for a subsequent offense. If the employer is a corporation, any officer or shareholder who owns or controls 10% or more of the corporation and who knowingly allows a violation of the law, may also be subject to civil and/or criminal liability. The new law also prohibits retaliation and requires a notice posting. The law explicitly states that violators may be subject to additional penalties for the misclassification of a worker with regard to unemployment compensation insurance, workers’ compensation insurance, or business, corporate, or personal income taxes.

This entry was written by Adam Malik.

Photo credit: BartCo