A Game-Changer for the Building and Construction Business: The New York Construction Industry Fair Play Act

New York has a new law seeking to curtail in the building and construction industry the practice of misclassifying employees as independent contractors (ICs).  On August 27, 2010, Governor Paterson signed into law the New York Construction Industry Fair Play Act.  The law, which goes into effect 60 days after enactment, only covers businesses in the construction industry. 

The legislation resulted from findings by both the legislative and executive branches of government in New York that the practice of misclassifying employees as ICs and paying workers “off the books” was 50% more prevalent in the construction industry than in all other industries in New York. 

A comprehensive review of the legislative background and an analysis of the law can be found in a published article by the author of this blog post in the New York Law Journal.

The Fair Play Act creates a “presumption of employment in the construction industry” by stating that “any person performing services for a contractor shall be classified as an employee” unless the person is a separate business entity (as defined in the Act) or unless three prescribed criteria are met.  Those three criteria are:

(A) the individual is free from control and direction in performing the job, both under his or her contract and in fact; (B) the service must be performed outside the usual course of business for which the service is performed; and (C) the individual is customarily engaged in an independently established trade, occupation, profession, or business that is similar to the service at issue.

To be considered a “separate business entity” under the Fair Play Act, 12 specific facts must all be established.  Those 12 factors are set forth in the new law

Under the Act, therefore, an independent contractor relationship can only be established if either the 12-part test or the 3-part “ABC” test is met.  In this fashion, the Fair Play Act changes the legal standard used for determining if a worker is an employee or independent contractor in the construction industry in New York.  For virtually all other industries in New York, the test used for determining a worker’s status remains the “common law test,” which involves an analysis of numerous factors to determine whether the business  retains or exercises the right to control the manner or means by which the worker performs the work in question. 

The New York State Department of Labor lists on its website 25 factors that it uses to determine if a worker is an employee or independent contractor.   The author of this blog post has collected over the past few years over 70 factors that various courts and federal and state agencies have used to determine if a worker is an independent contractor.  That list is part of the “IC Diagnostics” ™ process used by Pepper Hamilton LLP to help companies enhance their corporate compliance with independent contractor laws. 

The Fair Play Act also contains requirements that construction industry contractors post at their worksites information concerning employees’ rights to workers’ compensation coverage, unemployment insurance, minimum wage, overtime, and other workplace protections, as well as information about the penalties for non-compliance with the Fair Play Act, the rights of employees who are retaliated against for their exercise rights under the Fair Play Act, and contact information to file complaints.  The Act states that the state Department of Labor will prepare the notice and make it available 30 days after enactment of the law.

The Fair Play Act includes an anti-retaliation provision protecting any individual who exercises rights under the law.  In addition, it contains both civil and criminal penalties for “any contractor who willfully fails to classify an individual as an employee.” Further, any officer of a corporation or shareholder owning 10 percent or more of the corporation who knowingly permits a willful violation of the Act is subject to civil and criminal penalties.  Upon conviction, the corporation, officer, or shareholder is also subject to debarment and ineligibility to bid on public works contracts.

The article in the New York Law Journal also covers five key steps that construction employers should take to ensure compliance with the Fair Play Act, as well as commentary about another bill pending in the New York legislature dealing with ICs in all other industries.  

Your comments are invited.

Richard Reibstein 
Attorney at Law
Pepper Hamilton LLP
The New York Times Building
620 Eighth Avenue, 37th Floor
New York, New York 10018
T: 212.808.2722
F: 866.454.5857
E: reibsteinr@pepperlaw.com
www.pepperlaw.com

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One Response to A Game-Changer for the Building and Construction Business: The New York Construction Industry Fair Play Act

  1. martin says:

    Thanks for that post

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