The NY Workers Comp Board, on 4/4/14, issued a bulletin warning employers that attempts to describe delivery drivers as “independent contractors” will be subject to the NY 2014 Commercial Goods Transportation Act which will carry severe penalties for violations.
Employers should be aware that the definition of “commercial goods” includes all forms of fuel delivery, even though oil, propane and gasoline are not normally thought of as goods.
Goods delivered by heavy trucks, subject to federal DOT regulations have drivers whose pay is in the $100,000/yr range, with comp premiums of $10,000-$20,000/yr per driver. Thus, the temptations to reclassify drivers will be great.
New Law Written In Response of Trend to Misclassify Truck Drivers
This new law was written in response to a growing trend in NY to reclassify drivers of heavy vehicles in an effort to avoid the soaring costs of comp premiums. It will go into effect on 4/10/14. However, this comes at a time when the NYC DA, Cyrus Vance, Jr., also issued, last month, a grand jury report recommending enhanced penalties for employers attempting to reclassify workers in general as “independent contractors”.0
But such efforts are not new; they have been around since the comp law was passed in 1914. What the new law, and grand jury report, signal is that reclassification efforts have grown to the point of endangering the solvency of the NY State Insurance Fund (NYSIF). The figures cited in the grand jury report are that NY has a $6 billion/yr comp market, with $500 million/yr in fraudulent misclassification of workers and/or unpaid premiums. NYSIF currently insures 40% of the comp market and has the bulk of the misclassified workers and unpaid premiums.
Grand Jury Report Recommends Upgrading Penalties For Misclassification
The grand jury report recommends upgrading of criminal penalties for misclassifications, up from a class E felony (the lowest level of felony) to class D and, perhaps, even class C. This would be far more severe than the penalties in the 2014 Commercial Goods Transportation Act. Both would apply and employers should not think that penalties under one would rule out the other, although the changes advised by the grand jury are not yet law.
The new law and the grand jury report signal that the economic climate in NY work comp is in for changes not seen for decades and that the changes will be felt hardest in transportation. These, in turn, will be coming at a time when health care costs for drivers will also be rising at unprecedented rates.
Author: Attorney Theodore Ronca is a practicing lawyer from Aquebogue, NY. 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. [email protected]
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