BILL NUMBER:S4355

TITLE OF BILL:
An act
to amend the workers' compensation law, in relation to the definition of
employee

INTRODUCTION:
The accompanying legislative proposal is submitted on
behalf of the Standardbred Owners Association, Inc.
and recommends the addition of five express statutory exemptions under
Workers' Compensation Law §2(4) for certain workers in the harness
racing industry. In each case, the proposed exemption is firmly
consistent with time-honored legal principles used to determine a
worker's employment status.

The legislative proposal focuses on (1) the employment status of
harness race drivers; (2) the legal relationship between grooms
and/or caretakers and designated and/or "temporary" substituted
trainers (hereafter "Designated Trainers"); and (3) the independent
contractor status of shippers, farriers and veterinarians that
provide services to harness race horses. It is a response to concerns
throughout the industry about the escalating costs of Workers'
Compensation insurance, the lack of uniformity in the audit practice,
and recent decisions by the Workers' Compensation Law Judges that are
contrary both to custom and practice in the industry and the law. The
              

proposal seeks to bring uniformity and certainty to these particular
employment relationships based on time-honored law.

THE RELEVANT LAW:
The legal determination of whether an
employer/employee relationship exists focuses on the issue of
control. In general, under New York law an employee is a person who
contracts to work for an employer and is under the employer's control
with respect to "the results produced ... or the means used to
achieve the results." See, e.g., In re Cornelia St., Inc., 56 N.Y.2d
895,897,453 N.Y.S.2d 402,403 (1982). The principal consideration is
the employer's control over the individual's work. In the case of the
employee, that control is present. In the case of the independent
contractor, it is absent. See, e.g., O'Brian v. Spitzer, 7 N.Y.3d
239, 242, 818 N.Y.S.2d 844 (2006) ("Broadly speaking an 'employee' is
someone who works for another subject to substantial control, not
only over the results produced but also over the means used to
produce the results. A person who works for another subject to less
extensive control is an 'independent contractor.")

While there is no litmus test to establish a presence or absence of
control, many well-recognized and fairly typical factors are
considered in determining this legal issue, including the following
that are most relevant to the accompanying legislative proposal:

(1) The extent to which an employer controls a worker's activities by
such means as requiring full-time services, stipulating the hours of
work, requiring attendance at meetings and/or training programs, or
requiring prior permission for absence from work. See, e.g., In re
Claim of Bourk, 165 A.D.2d 969,561 N.Y.S.2d 858 (3d Dep't 1990)


(worker who was required to report daily to company's office, attend
training programs and received commissions determined by company only
after company approved the underlying sale, deemed an employee).

(2) The employer's control over the time, place and method of the
worker's performance. See, e.g., In re Bakal, 192 A.D.2d 817, 596
N.Y.S.2d 543 (3d Dep't 1993) (telephone interviewer deemed employee
where employer dictated hours during which interviews could be
conducted, provided instructions on how to conduct interview,
established deadlines for completion of work and unilaterally
determined geographic area where general interviews would be
conducted).

(3) Whether the employer furnishes necessary, equipment, tools or
supplies used by the worker in the performance of his/her work. See,
e.g., In re Claim of Murelio, 108 A.D.2d 974, 484 N.Y.S.2d 959 (3d
Dep't 1985) (worker deemed an employee where employer provided
individual premises, materials and specific instructions).

(4) Whether the worker receives a salary from the employer and whether
the employer withholds taxes or merely pays commissions, without any
withholding. See, e.g., In re Ted's Back Corp., 64 N.Y.2d 725, 485
N.Y.S.2d 742 (1984).

(5) Whether the employer reimburses the worker's expenses. See, e.g.,
In re Home, 188 A.D.2d 922,591 N.Y.S.2d 880 (3d Dep't 1992) (worker
reimbursed for cab fare, dry cleaning and promotional items deemed an
employee).

(6) Whether the employer sets the worker's wage rate. See, e.g., In re
Claim of Chopik; 145 A.D.2d 747,535 N.Y.S.2d 268 (3d Dep't 1988)
(employer-employee relationship existed between Modeling Agency and
model where agency and its client set hourly rate for model's
services, agency was responsible for all billing and collection of
fees, and model was paid after first deducting agency commission); and

(7) Whether the employer restricts the worker's performance of
services for others. Compare In re Duffy, 172 A.D.2d 914,568 N.Y.S.2d
201 (3d Dep't 1991) (worker who was permitted to work for other
carriers subject to company's authorization deemed an employee) with
In re Kearsh, 186 A.D.2d 970,589 N.Y.S.2d 114 (3d Dep't 1992) (cable
installers who were free to provide similar services to others deemed
independent contractors).

THE PROPOSED EXEMPTIONS:
The proposal also follows the format of the
"employee" exclusions set forth in §2(4) of the Workers' Compensation
Law. Like those statutory exclusions, each of the proposed exemptions
require that the worker's exempt status be supported by proof
establishing the absence of control in the underlying relationship
between the worker and the employer. Notably, as demonstrated below,
each of the proposed exemptions require evidentiary showings
satisfying the standard factors that provide a legal basis that the
relevant relationship falls outside of the legal employer-employee
relationship.

(i) The Harness Race Driver Exemption


Section 1 of the proposed legislation excludes from the term
"employee" the services of a harness race driver upon proof that
effectively establishes his/her independent contractor status. There
is some controversy in the industry concerning the employment status
of the harness race driver. The proposed legislation makes clear that
upon proof demonstrating the absence of control of owners and/or
trainers over the harness race driver's performance, his/her
employment status is not that of an employee. The proposal looks to
factors evidencing the extensive independence the harness race driver
has over the means and manner of his/her performance. For example,
while the harness race driver is selected by the owner and trainer of
a horse to participate in a certain race, he/she is free to decline
to participate or to select a different horse to drive. The harness
race driver chooses where and when he/she will appear for work and is
free to terminate his/her services at any time, including immediately
before the race he/she is to drive in. The driver furnishes his/her
own equipment goggles, colors, helmet, whip, racebike/sulky and is
responsible for his/her own expenses.

Furthermore, his/her compensation relates solely to the performance of
the horse he/she drives and is not controlled or varied by the owner
or trainer. More specifically, pursuant to the New York State Racing
and Wagering Board Rules NYCRR 9 Exec E 41, harness race drivers are
entitled to a fixed rate of five percent (5%) of the total purse
earned by any horse successfully driven by him/her. This sum of money
is deducted from the purse otherwise payable to the horse's owner and
directly and automatically paid to the driver by the relevant
racetrack pursuant to regulation. Accordingly, as a practical matter,
the harness race driver is treated as an independent contractor and a
1099 worker in all respects.

The proposed legislation addresses each of the considerations set
forth above. While it provides that a harness race driver shall be
excluded from "employee" status, like the other exemptions under
Workers' Compensation Law §2(4), this proposed exemption is afforded
only upon the required submission of proof that the harness race
driver is an independent contractor, it requires proof that the
harness race driver's (i) compensation is determined by his/her
success in performance as opposed to the hours worked and that he/she
is not treated as an employee for federal or state tax purposes (see
Proposed Legislation, Section 1(a) & (h)); (ii) he/she is free to
accept or decline requests to drive horses and to unilaterally
terminate his/her services at anytime (id. at Section l(c), (d) &
(g)), and (iii) that he/she is personally responsible for furnishing
his/her own equipment and paying his/her own expenses (Id. at Section
l(c)). In short, this proposed legislation provides certainty as to
the harness race driver's employment status upon proof establishing
his/her independent contractor status under traditional legal analysis.

(ii) Groom/Caretaker and Designated Trainer Exemption

Section 2 of the Proposed Legislation confirms that the relationship
between the grooms and/or caretakers of harness race horses and
Designated Trainers typically will not constitute an
employer/employee relationship.
Again, to qualify for the exemption, proof must be submitted
demonstrating that the Designated Trainer asserts no meaningful


control over the services being provided by the groom and/or
caretaker. By way of background, the Designated Trainer of a harness
race horse usually assumes that role on an ad hoc, temporary basis
necessitated by the absence of the harness race horse's regular
trainer. The Designated Trainer, in practice, has no financial or
meaningful employment relationship with the grooms and/or caretakers
of that harness race horse and is nothing more than a "stand-in" for
the harness race horse's trainer. The Designated Trainer's
interaction with the groom and/or caretaker is de minimus and he/she
provides no compensation to the groom and/or caretaker.

Recognizing the practical realities surrounding the nature of the
relationship between the groom and/or caretaker of a harness race
horse and the Designated Trainer or "temporary" substitute trainer of
that horse, the second proposed exemption provides that upon the
submission of proof establishing the lack of control of a groom
and/or caretaker by the Designated Trainer, no employer/employee
relationship shall be deemed to exist between them. This proposed
exclusion again follows the exemption format set forth in Subdivision
4 of Section 2 of the Workers' Compensation Law and is again
predicated on the well-recognized factors used to determine
employment status that are outlined above. Under this recommended
provision, the employer/employee exclusion would be applied where the
proof establishes that (i) the Designated Trainer exerts no control
over the performance of services by the groom and/or caretaker (see
Proposed Legislation, Section 2(b)); (ii) the groom and/or caretaker
is free to provide his or her services to trainers other than the
Designated Trainer (Id. at Section 2(c)); (iii) the Designated
Trainer provides no equipment or supplies to the groom and/or
caretaker and does not reimburse the groom and/or caretaker for h
is or her expenses (id. At Section 2(d) & (e)); and (iv) the
compensation of the groom and/or caretaker is not paid by the
Designated Trainer and he/she is not treated as an employee for tax
purposes by the Designated Trainer (Id. at Section 2(a) & (f)).

(iii) The Shipper, Farrier and Veterinarian Exemptions

Sections 3 through 5 of the Proposed Legislation address the
independent contractor status of the shipper or transporter of a
harness race horse (Section 3), the farrier who renders services to a
harness race horse (Section 4), and the veterinarian retained to
treat a harness race horse (Section 5). Once again this legislation
follows the format of the "employee" exclusion set forth in §2(4) of
the Workers' Compensation Law and requires that the entity's exempt
status be supported by proof establishing that the entity providing
services is not subject to the control of its customers. The
non-employee status of each of these entities is demonstrated by
proof that each entity itself controls the means and manner of the
services it renders. Each exemption requires evidence that the
relevant entity is compensated for its services pursuant to a
negotiated fee or by a fee set by the entity and that such fee is not
related to actual hours worked (see, e.g., Sections 3(a), 4(a) and
Sea)). The other various areas of proof outlined by each of these
proposed exemptions are based on the well-recognized legal factors,
discussed in Section B above, that are considered with respect to the
issue of control in determining whether an employer/employee
relation- ship exists. These include (1) that each entity is free


to provide its services to customers of its choice (Sections 3(b),
4(b) and S(b)); (ii) that each entity may unilaterally determine when
and where it will perform such services (Sections 3(c), 4(c) and
5(c); (iii) that each entity is responsible for its own expenses and
furnishing its own equipment (Sections 3(d) and (e), 4(d) and (e),
5(d) and (e)); (iv) that each entity is free to terminate its
services at any time (Sections 3(f), 4(f) and 5(f)); and (v) that the
party that retains each entity does not treat it as an employee for
federal or state tax purposes (Sections 3(g), 4(g) and 5(g)). In
short, these proposed exemptions focus on the essential aspects of
each entity that confirm the true independence exercised by that
entity in performing its services.

JUSTIFICATION:
In sum, the accompanying proposal seeks to provide critical guidance
and clarity in an area of increasing uncertainty. Most importantly,
this legislative proposal not only is in full conformance with
well-established legal precepts that have historically defined the
scope of employer/employee relationships, but it also will protect
owners and trainers from being unduly exposed to unwarranted exposure
to liability under the Workers' Compensation Laws. By requiring that
each exemption be supported by proof negating the employer-employee
relationship, the proposed legislation is designed to ensure that
liability under the Workers' Compensation Law is allocated in a
consistent and responsible manner.

LEGISLATIVE HISTORY:
A.10309 of 2010: Referred to Assembly Labor Committee

FISCAL IMPLICATIONS:
None.

EFFECTIVE DATE:
This act shall take effect immediately.