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By Andy J. Ryan, Esq., Woods Oviatt Gilman LLP
In September 2007, then Governor Elliott Spitzer, signed Executive Order No. 17 establishing the Joint Enforcement Task Force on Employee Misclassification with a mandate of investigating employers who treat their employees as independent contractors. The task force consists of the Commissioner of Labor, the Attorney General, the New York State Commissioner of Taxation and Finance, the Chair of the Worker’s Compensation Board, the Worker’s Compensation Fraud Inspector General and the Comptroller of the City of New York. The purpose of the task force is to share information regarding employee misclassification violations and to pool their investigative and enforcement resources. If an employer has been investigated by any of the task force members and found to have misclassified its employees as independent contractors, then that information will be shared with the other task force members who will then coordinate a joint investigation and enforcement proceeding against that employer.
According to the task force’s report to former Governor Spitzer dated February 1, 2008, fifteen (15) inter-agency enforcement efforts had already been conducted with 117 employers identified. The Joint Task Force found over $3 million in unpaid or underpaid wages and had assessed $5,000 in fines for child labor violations.
Are You Properly Classifying Your Employees?
Any business that uses the same independent contractors on a regular basis should be concerned about whether those people are truly independent contractors or whether they are actually employees. A written agreement between the business and the alleged independent contractor that states that the person is an independent contractor is not controlling on any agency that is prosecuting a complaint. Determining whether a person is truly an independent contractor or an employee revolves around whether the person has the control over the means and manner of providing the services, whether the person provides labor or services to more than just one entity, whether the person is subject to the risks of profit or loss, and/or whether the person doing the work is ultimately responsible for the satisfaction to the customer.
One problem that exists is that each agency within the task force has different criteria for determining whether a person is an independent contractor or an employee. Therefore, a determination by one agency is not binding upon any of the others and according to the joint task force, a number of investigations have revealed inconsistent results in terms of determinations on whether the person is an independent contractor or an employee. In the task force’s February 1, 2008 report, it recognized this problem and proposed that a single standard be adopted for determining whether an individual is an employee or an independent contractor under all the different regulations governing the task force members. This is an eminently reasonable proposal but it remains to be seen whether it is implemented.
Although former Governor Spitzer resigned in March 2008, the task force is still in operation and Governor Patterson has apparently endorsed the task force plan.
The safe route to take is to consult with an attorney if you have any questions regarding the person’s legal status as an independent contractor and to always err on the side of caution as the employer’s liability for unpaid wages, penalties and fines can be enormous.
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