The “New York Construction Industry Fair Play Act” has gone into effect on 10/26/10. It is codified as Section 861-C of the Labor Law.
The act was deemed necessary to halt a runaway trend in the construction industry where many workers, formerly regarded as employees, were reclassified as “independent contractors”, giving the former employer considerable savings on work comp, short term disability, unemployment insurance and Social Security payroll taxes. A former employee would realize a variety of large tax deductions for being “self employed”, leading many to readily accept a new arrangement.
But the reforms in the “Fair Play Act” carry a number of unintended consequences. The act contains 15 separate tests and indicia, all of which must be met for a business or individual working in conjunction with a construction employer to be considered an “independent contractor”. If they are not met, there is a presumption of employer/employee relationship. (WCxKit)
Construction sites are the most fertile areas for large negligence claims, but only if the plaintiff is injured by the negligence of someone other than his/her employer. The “Fair Play Act”, with its sweeping presumptions of employer/employee relationship makes employees of many people in fact working for independent companies.
The act contains a strange duality. On the one hand, many people are deemed to be employees; on the other hand, the fact that they are taking tax deductions as self-employed people is not considered a violation of state tax laws. Nor is the absence of payments for Social Security or unemployment considered a violation of state or federal law.
The contradiction is due to the Workers’ Compensation Boards power to make finding based on “substantial evidence” (a weak test) rather than “preponderance of the evidence” (a stronger test). So, a person can be an employee for the purpose of one law while remaining an “independent contractor” for the purposes of many other laws. (WCxKit)
The greatest impact will be on a number of large negligence suits. In these situations, the defendants will have a ready made ground for dismissal, but the WCB must first rule on it since it has primary jurisdiction in ruling on an employer/employee relationship. The Board can be expected to rule in favor of employer/employee relationship where the employee wants it, but what can it do when the employee opposes it, wishing, instead, to pursue a negligence suit? The answer is that it will make a series of contradictory rulings until the courts impose some consistency.
Initial Board decisions can be expected within the coming year.
Author: Attorney Theodore Ronca is a practicing lawyer from Aquebogue, New York. He is a frequent writer and speaker, and has represented employers in the areas of workers' compensation, Social Security disability, employee disability plans, and subrogation for over 30 years. Attorney Ronca can be reached at 631-722-2100.
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Do not use this information without independent verification. All state laws vary. You should consult with your insurance broker or agent about workers comp issues.
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