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Legislative Memo

Frank Kerbein
Director, Center for Human Resources
T 518.465.7517 x210
www.bcnys.org

BILL:

A.9706-B (Part SS) Article VII – Public Protection and General Government

Support

SUBJECT:

The New York State Construction Industry Fair Play Act

 

DATE:

April 12, 2010

 

The Business Council of New York State opposes the above referenced legislation that enacts The New York State Construction Fair Play Act. Part SS of the Assembly Budget Article VII bill (A.9706-B) creates the presumption that all workers at a construction site are employees.

Part SS of the Assembly Budget Article VII bill (A.9706-B) establishes a presumptive three part test in the construction industry that would destroy the independent contractor status for many workers. Under the proposed three part test any person performing services for a contractor or subcontractor shall be classified as an employee unless all of the following criteria are met: (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.

The State government has the duty and responsibility to ensure its tax, labor and workers compensation laws are being implemented and enforced. Under Executive Order 17 (2007), former Governor Eliot Spitzer established a Task Force to coordinate efforts across six agencies to ensure that all employers comply with the state's employment and tax laws. The Task Force has successfully pursued employment and tax violations and issued two reports about employee misclassification. Since New York already has a Task Force successfully investigating violations of employment and tax laws, this industry specific legislation is not warranted and should be rejected.

To declare that New York State's construction industry is “experiencing dangerous levels of employee fraud” by “unscrupulous employers” in “record numbers” maligns the entire construction industry and is not validated in the annual reports issued by the Task Force. The language of this provision grossly overstates the amount of “employee misclassification” by using the term to include outright fraud (i.e. paying individuals off the books) and genuine issues related to the employer/employee relationship. Fraud hurts all employers, including those in the construction industry, and should be pursued to the full extent of the law. A review of the outcomes of the Task Force's work over the last several years shows far more fraud-related outcomes than “independent contractor” issues. Any reasonable cost-benefit analysis based on the outcomes of the Task Force would point to continued coordinated efforts of state agencies to weed out fraud, to ensure workers are afforded their rights under the law, and to ensure all of New York's employers are operating on a level playing field.

Independent contractors possess an entrepreneurial spirit and sense of responsibility that derives from running one's own business. These professionals often provide the flexibility and cost savings which are particularly important to the economic security of New York. With New York's economy reeling from 9 percent unemployment, multi-billion dollar budget deficits, and the migration of people and businesses out of the state, the emphasis should be placed on ensuring that New York's current laws are enforced, and the coordinated efforts of the appropriate enforcement agencies are weeding out fraud where it exists, regardless of sector.

For the reasons stated in this memorandum, The Business Council of New York State opposes the budget language which proposes “The New York State Construction Fair Play Act”.