Update: New York’s Construction Industry Misclassification Law Takes Effect Today; Ends Lawful Use of Many Independent Contractors and Requires Posting of Government Notice

The New York Construction Industry Fair Play Act goes into effect today, as previously noted in a detailed posting on this site  and in an article published in the New York Law Journal by a publisher of this blog.  From this point forward in the construction industry, companies and their officers that hire individuals performing construction work but fail to place them on their W-2 payroll, or fail to cover them for unemployment and workers compensation purposes, face civil and criminal liability if the workers do not meet a super-strict definition of the term “independent contractor.” 

In addition, all construction industry employers must post on their worksites a required notice prepared by the New York State Department of Labor.  As the website of the New York Commission of Labor states:

“Construction industry employers must post a notice about the Fair Play Act in a prominent and accessible place on the job site for all workers to see. The poster is available at the following link: http://www.labor.ny.gov/sites/legal/laws/pdf_word_docs/Fair%20Play%20Act%20revision.pdf.” 

The law further provides that the poster “shall be provided in English, Spanish or other languages required by the Commissioner” and “shall be constructed of materials capable of withstanding adverse weather conditions.”

A failure to post the required notice is a violation of the law that subjects the offending construction firm to a civil penalty of up to $1,500 for a first violation and up to $5,000 for a subsequent violation within a five year period. 

It is expected that investigators from the New York State Department of Labor will be vigilant to determine if the required notice is properly posted on websites.  It is also expected that unions seeking to organize workers on non-union jobsites, as well as agents of unionized construction contractors in competition with union-free firms, will be reporting non-union construction contractors that fail to post the required notice in accordance with the new law.  

As noted in a previous posting on this site, 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 and are detailed in the prior posting on this site, along with the civil and criminal penalties to which construction firms and their officers are exposed for misclassification of construction workers as independent contractors rather than as employees under the strict test imposed by the new law.

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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