Add Art 25-B SS861 - 861-h, Lab L; add S99-t, St Fin L
 
Enacts the "New York state construction industry fair play act"; defines terms; provides notice to persons receiving remuneration from contractors and subcontractors; describes violations; authorizes enforcement and penalties; creates a new fund in the state finance law entitled the construction industry classification fund.
STATE OF NEW YORK
________________________________________________________________________
6194
2009-2010 Regular Sessions
IN SENATE
September 25, 2009
___________
Introduced by Sen. FOLEY -- read twice and ordered printed, and when
printed to be committed to the Committee on Rules
AN ACT to amend the labor law, in relation to enacting the "New York
state construction industry fair play act"; and to amend the state
finance law, in relation to creating the construction industry classi-
fication fund
The People of the State of New York, represented in Senate and Assem-bly, do enact as follows:
1 Section 1. The labor law is amended by adding a new article 25-B to
2 read as follows:
3 ARTICLE 25-B
4 THE NEW YORK STATE CONSTRUCTION INDUSTRY FAIR PLAY ACT
5 Section 861. Short title.
6 861-a. Legislative findings and intent.
7 861-b. Definitions.
8 861-c. Presumption of employment in the construction industry.
9 861-d. Notice to persons receiving remuneration from contractors
10 and subcontractors.
11 861-e. Violations.
12 861-f. Enforcement and penalties.
13 861-g. Advisory committee on construction industry classifica-
14 tion.
15 861-h. Retaliation.
16 § 861. Short title. This article shall be known and may be cited as
17 "the New York state construction industry fair play act".
18 § 861-a. Legislative findings and intent. The legislature hereby finds
19 and declares that New York state's construction industry is experiencing
20 dangerous levels of employee misclassification fraud. Unscrupulous
21 employers are intentionally reporting employees as independent contrac-
22 tors to state and federal authorities or workers' compensation carriers
23 in record numbers. In addition, there has been an explosion of employers
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[] is old law to be omitted.
LBD11756-06-9
S. 6194 2
1 who operate in the underground economy and fail to report all or a siza-
2 ble portion of their workers.
3 The legislature hereby finds and declares that recent studies of New
4 York city's construction industry alone suggests that as many as fifty
5 thousand New York city construction workers -- nearly one in four -- are
6 either misclassified as independent contractors or are employed by
7 construction contractors completely off the books. Construction industry
8 fraud reduces government revenue, shifts tax and workers' compensation
9 insurance costs to law-abiding employees, lowers working conditions and
10 steals jobs from legitimate employers and their employees.
11 In two thousand five alone, it was estimated that the lost payroll
12 taxes and social insurance premium payments in New York city due to
13 classification fraud exceeded two hundred seventy million dollars. In
14 addition the government and providers were forced to pay an additional
15 one hundred forty-eight million dollars for health care costs fraudu-
16 lently shifted from employers. Finally, it was estimated that the
17 government was cheated out of almost seventy million dollars in lost
18 income taxes due. Misclassification fraud creates significant problems
19 for workers. These workers are not covered by workers' compensation,
20 unemployment insurance, or temporary disability. They are liable for
21 taxes they do not owe and lose overtime and health benefits. Finally,
22 unscrupulous contractors who engage in fraud are able to undercut law-a-
23 biding contractors by as much as thirty percent in the price of
24 construction services.
25 Therefore, the legislature hereby finds and declares that government
26 has an obligation to curb this underground economy, enforce long-stand-
27 ing employment laws, ensure compliance with essential social insurance
28 protections and eliminate the unfair competitive advantage from contrac-
29 tors in the underground economy by and through the enactment of the New
30 York state construction industry fair play act.
31 § 861-b. Definitions. As used in this article:
32 1. "Construction" means constructing, reconstructing, altering, main-
33 taining, moving, rehabilitating, repairing, renovating or demolition of
34 any building, structure, or improvement, or relating to the excavation
35 of or other development or improvement to land.
36 2. "Contractor" means any sole proprietor, partnership, firm, corpo-
37 ration, limited liability company, association or other legal entity
38 permitted by law to do business within the state who engages in
39 construction as defined in this article.
40 3. "Contractor" includes a general contractor and a subcontractor.
41 4. "Department" means the department of labor.
42 5. "Commissioner" means the commissioner of labor.
43 6. "Employer" means any contractor that employs individuals deemed
44 employees under this article.
45 § 861-c. Presumption of employment in the construction industry. 1.
46 Any person performing services for a contractor shall be classified as
47 an employee unless all of the following criteria are met:
48 (a) the individual is free from control and direction in performing
49 the job, both under his or her contract and in fact;
50 (b) the service must be performed outside the contractor's usual
51 course of business; and
52 (c) the individual must be customarily engaged in an independently
53 established trade, occupation, profession, or business that is similar
54 to the service at issue.
55 2. The failure to withhold federal or state income taxes or to pay
56 unemployment compensation contributions or workers' compensation premi-
S. 6194 3
1 ums with respect to an individual's wages shall not be considered in
2 making a determination under this section.
3 3. An individual's exercise of the option to secure workers' compen-
4 sation insurance with a carrier as a sole proprietor or partnership
5 shall not be considered in making a determination under this section.
6 § 861-d. Notice to persons receiving remuneration from contractors and
7 subcontractors. 1. Contractors shall provide to all individuals receiv-
8 ing remuneration to perform construction work a written notice, provided
9 by the commissioner, that describes the responsibility of independent
10 contractors to pay taxes required by state and federal law and the
11 rights of employees to workers' compensation, unemployment benefits,
12 minimum wage, overtime and other federal and state workplace
13 protections. Such information shall also contain contact information for
14 such persons to file complaints or inquire with the commissioner about
15 employment classification status. In addition, the notice shall contain
16 the address to the web site described in subdivision three of this
17 section, the protections in this article against retaliation and the
18 penalties in this article if the contractor has failed to properly clas-
19 sify the person as an employee.
20 2. The information in subdivision one of this section shall be
21 provided in Spanish or other languages required by the commissioner.
22 3. Within six months of the effective date of this article, the
23 commissioner shall create the notice described in subdivision one of
24 this section. In addition, within the same time period, the commissioner
25 shall create a web site that contains the same information and the
26 notice. Such notice shall be provided to contractors through downloading
27 from the web site.
28 4. Contractors in their agreements with all subcontractors shall
29 require them to:
30 (a) provide the notice described in this section, and
31 (b) place the notice requirement in contracts with any lower tier
32 subcontractors.
33 5. Contractors who violate this section shall be fined:
34 (a) two thousand dollars per individual who is not notified; and
35 (b) five thousand dollars per contract with a subcontractor or lower
36 tier subcontractor that does not contain the notice requirement.
37 § 861-e. Violations. A contractor is guilty of violating the
38 provisions of section eight hundred sixty-one-c of this article when he
39 or she fails to properly classify an individual as an employee.
40 § 861-f. Enforcement and penalties. 1. For the purposes of this
41 section:
42 (a) the term "willful violation" shall mean a contractor who knew or
43 should have known that his or her conduct was prohibited by this
44 section;
45 (b) the term "debarment" shall mean debarment from bidding on any and
46 all state, municipal or public authority public works projects.
47 2. Any contractor who fails to classify an individual as an employee
48 according to this article, in any respect, shall be subject to criminal
49 and civil remedies. The penalties and fines to be imposed on a contrac-
50 tor for violations of this article are as follows:
51 (a) When a contractor willfully violates the provisions of this chap-
52 ter for a first violation the contractor shall pay a civil penalty of
53 ten thousand dollars per employee.
54 (b) When a contractor willfully violates the provisions of this chap-
55 ter for a subsequent violation the contractor shall pay a civil penalty
56 of twenty thousand dollars per employee.
S. 6194 4
1 3. In addition to civil penalties, the criminal penalties imposed on a
2 contractor who willfully violates the provisions of this chapter shall
3 be a misdemeanor and upon conviction shall be punished for a first
4 offense by imprisonment for not more than thirty days and for a subse-
5 quent offense by imprisonment for not more than sixty days.
6 4. If the contractor is a corporation, any officer of such corporation
7 or shareholder who owns or controls at least ten percent of the
8 outstanding stock of such corporation who knowingly permits the corpo-
9 ration to willfully violate the provisions of this chapter shall also be
10 in violation of this chapter and the civil and criminal penalties herein
11 shall attach to such officer upon conviction.
12 5. Any contractor that willfully violates the provisions of this chap-
13 ter and such violations result in a failure to pay any other statutory
14 payment or coverage obligations, including but not limited to, unemploy-
15 ment insurance, workers' compensation insurance, or business or personal
16 income tax shall be subject, at the discretion of the commissioner, to
17 additional civil penalties as follows:
18 (a) for a first offense up to an additional fifteen thousand dollars
19 per employee; and
20 (b) for a subsequent offense up to an additional thirty thousand
21 dollars per employee.
22 6. Any contractor or any officer or shareholder who owns or controls
23 at least ten percent of the outstanding stock of such corporation that
24 has been convicted of a felony offense for conduct relating to the
25 misclassification of an employee shall be subject to debarment and be
26 ineligible to submit a bid and/or be awarded any public works contract
27 with the state, any municipal corporation, public benefit corporation or
28 public body for a period of five years from the date of conviction.
29 7. Nothing in this section shall limit the availability of other reme-
30 dies at law or in equity.
31 § 861-g. Advisory committee on construction industry classification.
32 1. There is hereby established the advisory committee on employee clas-
33 sification. The mission of such advisory committee is to develop recom-
34 mendations for a comprehensive and strategic statewide approach to
35 addressing the problem of employee misclassification and to ensure
36 contractor compliance with this article.
37 2. The advisory committee shall be composed of the commissioner or a
38 designee, serving ex officio; the attorney general or a designee, serv-
39 ing ex officio; the commissioner of taxation and finance, serving ex
40 officio; the chair of the workers' compensation board; thirteen members
41 shall be appointed by the governor and shall serve at his or her pleas-
42 ure as follows: three representatives from three different building
43 trades unions; three representatives of the New York AFL-CIO; three
44 representatives of the business community; one representative of resi-
45 dential developers; one representative of residential construction
46 contractors; one representative of commercial developers; and one repre-
47 sentative of commercial construction contractors.
48 3. The commissioner shall serve as the chair of the advisory commit-
49 tee. All public members of the advisory committee shall serve without
50 compensation. Vacancies on the advisory committee shall be filled in the
51 same manner as the original appointment.
52 4. In furtherance of its mission stated in subdivision one of this
53 section, the advisory committee shall be authorized to:
54 (a) make recommendations to the department, the attorney general, the
55 department of taxation and finance and the workers' compensation board
S. 6194 5
1 with respect to synchronizing each respective department's regulations
2 and policies regarding employee misclassification;
3 (b) make recommendations to enhance mechanisms for identifying employ-
4 ee misclassification where it does occur;
5 (c) work with business, labor and community groups to develop educa-
6 tional materials that distinguish the difference between an independent
7 contractor and an employee; and
8 (d) cooperate with state, federal and local social services agencies
9 to identify ways to provide assistance to vulnerable populations that
10 have been exploited by employee misclassification, including, but not
11 limited to, immigrant workers.
12 5. The advisory committee shall issue a report annually to the gover-
13 nor on the status of implementation of this article, to include publicly
14 available information regarding: cases brought, wages and taxes recov-
15 ered on behalf of the state, outcomes of cases, legal or administrative
16 barriers to successful implementation, a review of the process used to
17 adjudicate misclassification cases, and proposals for any additional
18 legislative action that may be needed to enhance the state's efforts to
19 address employee misclassification in the construction industry and any
20 other industry in the state.
21 6. The advisory committee is authorized to call upon any department,
22 office, division or agency of this state to supply it with data and
23 other information, personnel or assistance available to such agency as
24 the advisory committee deems necessary to discharge its duties under
25 this article. Each department, office, division or agency of this state
26 is hereby required, to the extent not inconsistent with law, to cooper-
27 ate fully with the advisory committee and to furnish the advisory
28 committee such assistance on as timely a basis as is necessary to accom-
29 plish the purposes of this article. The advisory committee may consult
30 with experts or other knowledgeable individuals in the public or private
31 sector on any aspect of its mission.
32 § 861-h. Retaliation. 1. It is an intentional violation of this arti-
33 cle for an employer or entity, or any agent of an employer or entity, to
34 retaliate through discharge or in any other manner against any person
35 for exercising any rights granted under this article. Such retaliation
36 shall subject an employer or entity to civil penalties pursuant to this
37 article or a private cause of action, or both.
38 2. It is an intentional violation of this article for an employer or
39 entity to retaliate against a person for:
40 (a) making a complaint to an employer or entity, to a co-worker, to a
41 community organization, before a public hearing, or to a state or feder-
42 al agency that rights guaranteed under this article have been violated;
43 (b) causing to be instituted any proceeding under or related to this
44 article; or
45 (c) testifying or preparing to testify in an investigation or proceed-
46 ing under this article.
47 § 2. The state finance law is amended by adding a new section 99-t to
48 read as follows:
49 § 99-t. Construction industry classification fund. 1. There is hereby
50 established in the joint custody of the state comptroller and the
51 commissioner of taxation and finance an account in the miscellaneous
52 special revenue fund to be known as the "construction industry classi-
53 fication fund".
54 2. The construction industry classification fund shall consist of all
55 moneys received by the state as fees and civil penalties pursuant to
56 article twenty-five-B of the labor law.
S. 6194 6
1 3. Such fund shall be subject to appropriation by the department of
2 labor for administration, investigation and other expenses incurred in
3 carrying out its powers and duties pursuant to article twenty-five-B of
4 the labor law. The department of labor may hire as many investigators
5 and other personnel as may be necessary. Any moneys in the fund at the
6 end of the fiscal year in excess of any moneys necessary for the depart-
7 ment of labor to carry out its powers and duties under article twenty-
8 five-B shall be available to the department of labor for the next fiscal
9 year for any of the department of labor's duties.
10 § 3. Notwithstanding any other provision of the law to the contrary,
11 the provisions of section eight hundred sixty-one-c of the labor law
12 shall apply to and be utilized for all determinations of a construction
13 industry individuals' employment status under the labor law, the work-
14 ers' compensation law, the tax law or any other law.
15 § 4. This act shall take effect on the sixtieth day after it shall
16 have become a law.