S. 6194 2
WHO OPERATE IN THE UNDERGROUND ECONOMY AND FAIL TO REPORT ALL OR A SIZA-
BLE PORTION OF THEIR WORKERS.
THE LEGISLATURE HEREBY FINDS AND DECLARES THAT RECENT STUDIES OF NEW
YORK CITY'S CONSTRUCTION INDUSTRY ALONE SUGGESTS THAT AS MANY AS FIFTY
THOUSAND NEW YORK CITY CONSTRUCTION WORKERS -- NEARLY ONE IN FOUR -- ARE
EITHER MISCLASSIFIED AS INDEPENDENT CONTRACTORS OR ARE EMPLOYED BY
CONSTRUCTION CONTRACTORS COMPLETELY OFF THE BOOKS. CONSTRUCTION INDUSTRY
FRAUD REDUCES GOVERNMENT REVENUE, SHIFTS TAX AND WORKERS' COMPENSATION
INSURANCE COSTS TO LAW-ABIDING EMPLOYEES, LOWERS WORKING CONDITIONS AND
STEALS JOBS FROM LEGITIMATE EMPLOYERS AND THEIR EMPLOYEES.
IN TWO THOUSAND FIVE ALONE, IT WAS ESTIMATED THAT THE LOST PAYROLL
TAXES AND SOCIAL INSURANCE PREMIUM PAYMENTS IN NEW YORK CITY DUE TO
CLASSIFICATION FRAUD EXCEEDED TWO HUNDRED SEVENTY MILLION DOLLARS. IN
ADDITION THE GOVERNMENT AND PROVIDERS WERE FORCED TO PAY AN ADDITIONAL
ONE HUNDRED FORTY-EIGHT MILLION DOLLARS FOR HEALTH CARE COSTS FRAUDU-
LENTLY SHIFTED FROM EMPLOYERS. FINALLY, IT WAS ESTIMATED THAT THE
GOVERNMENT WAS CHEATED OUT OF ALMOST SEVENTY MILLION DOLLARS IN LOST
INCOME TAXES DUE. MISCLASSIFICATION FRAUD CREATES SIGNIFICANT PROBLEMS
FOR WORKERS. THESE WORKERS ARE NOT COVERED BY WORKERS' COMPENSATION,
UNEMPLOYMENT INSURANCE, OR TEMPORARY DISABILITY. THEY ARE LIABLE FOR
TAXES THEY DO NOT OWE AND LOSE OVERTIME AND HEALTH BENEFITS. FINALLY,
UNSCRUPULOUS CONTRACTORS WHO ENGAGE IN FRAUD ARE ABLE TO UNDERCUT LAW-A-
BIDING CONTRACTORS BY AS MUCH AS THIRTY PERCENT IN THE PRICE OF
CONSTRUCTION SERVICES.
THEREFORE, THE LEGISLATURE HEREBY FINDS AND DECLARES THAT GOVERNMENT
HAS AN OBLIGATION TO CURB THIS UNDERGROUND ECONOMY, ENFORCE LONG-STAND-
ING EMPLOYMENT LAWS, ENSURE COMPLIANCE WITH ESSENTIAL SOCIAL INSURANCE
PROTECTIONS AND ELIMINATE THE UNFAIR COMPETITIVE ADVANTAGE FROM CONTRAC-
TORS IN THE UNDERGROUND ECONOMY BY AND THROUGH THE ENACTMENT OF THE NEW
YORK STATE CONSTRUCTION INDUSTRY FAIR PLAY ACT.
S 861-B. DEFINITIONS. AS USED IN THIS ARTICLE:
1. "CONSTRUCTION" MEANS CONSTRUCTING, RECONSTRUCTING, ALTERING, MAIN-
TAINING, MOVING, REHABILITATING, REPAIRING, RENOVATING OR DEMOLITION OF
ANY BUILDING, STRUCTURE, OR IMPROVEMENT, OR RELATING TO THE EXCAVATION
OF OR OTHER DEVELOPMENT OR IMPROVEMENT TO LAND.
2. "CONTRACTOR" MEANS ANY SOLE PROPRIETOR, PARTNERSHIP, FIRM, CORPO-
RATION, LIMITED LIABILITY COMPANY, ASSOCIATION OR OTHER LEGAL ENTITY
PERMITTED BY LAW TO DO BUSINESS WITHIN THE STATE WHO ENGAGES IN
CONSTRUCTION AS DEFINED IN THIS ARTICLE.
3. "CONTRACTOR" INCLUDES A GENERAL CONTRACTOR AND A SUBCONTRACTOR.
4. "DEPARTMENT" MEANS THE DEPARTMENT OF LABOR.
5. "COMMISSIONER" MEANS THE COMMISSIONER OF LABOR.
6. "EMPLOYER" MEANS ANY CONTRACTOR THAT EMPLOYS INDIVIDUALS DEEMED
EMPLOYEES UNDER THIS ARTICLE.
S 861-C. PRESUMPTION OF EMPLOYMENT IN THE CONSTRUCTION INDUSTRY. 1.
ANY PERSON PERFORMING SERVICES FOR A CONTRACTOR 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 CONTRACTOR'S USUAL
COURSE OF BUSINESS; AND
(C) THE INDIVIDUAL MUST BE CUSTOMARILY ENGAGED IN AN INDEPENDENTLY
ESTABLISHED TRADE, OCCUPATION, PROFESSION, OR BUSINESS THAT IS SIMILAR
TO THE SERVICE AT ISSUE.
2. THE FAILURE TO WITHHOLD FEDERAL OR STATE INCOME TAXES OR TO PAY
UNEMPLOYMENT COMPENSATION CONTRIBUTIONS OR WORKERS' COMPENSATION PREMI-
S. 6194 3
UMS WITH RESPECT TO AN INDIVIDUAL'S WAGES SHALL NOT BE CONSIDERED IN
MAKING A DETERMINATION UNDER THIS SECTION.
3. AN INDIVIDUAL'S EXERCISE OF THE OPTION TO SECURE WORKERS' COMPEN-
SATION INSURANCE WITH A CARRIER AS A SOLE PROPRIETOR OR PARTNERSHIP
SHALL NOT BE CONSIDERED IN MAKING A DETERMINATION UNDER THIS SECTION.
S 861-D. NOTICE TO PERSONS RECEIVING REMUNERATION FROM CONTRACTORS AND
SUBCONTRACTORS. 1. CONTRACTORS SHALL PROVIDE TO ALL INDIVIDUALS RECEIV-
ING REMUNERATION TO PERFORM CONSTRUCTION WORK A WRITTEN NOTICE, PROVIDED
BY THE COMMISSIONER, THAT DESCRIBES THE RESPONSIBILITY OF INDEPENDENT
CONTRACTORS TO PAY TAXES REQUIRED BY STATE AND FEDERAL LAW AND THE
RIGHTS OF EMPLOYEES TO WORKERS' COMPENSATION, UNEMPLOYMENT BENEFITS,
MINIMUM WAGE, OVERTIME AND OTHER FEDERAL AND STATE WORKPLACE
PROTECTIONS. SUCH INFORMATION SHALL ALSO CONTAIN CONTACT INFORMATION FOR
SUCH PERSONS TO FILE COMPLAINTS OR INQUIRE WITH THE COMMISSIONER ABOUT
EMPLOYMENT CLASSIFICATION STATUS. IN ADDITION, THE NOTICE SHALL CONTAIN
THE ADDRESS TO THE WEB SITE DESCRIBED IN SUBDIVISION THREE OF THIS
SECTION, THE PROTECTIONS IN THIS ARTICLE AGAINST RETALIATION AND THE
PENALTIES IN THIS ARTICLE IF THE CONTRACTOR HAS FAILED TO PROPERLY CLAS-
SIFY THE PERSON AS AN EMPLOYEE.
2. THE INFORMATION IN SUBDIVISION ONE OF THIS SECTION SHALL BE
PROVIDED IN SPANISH OR OTHER LANGUAGES REQUIRED BY THE COMMISSIONER.
3. WITHIN SIX MONTHS OF THE EFFECTIVE DATE OF THIS ARTICLE, THE
COMMISSIONER SHALL CREATE THE NOTICE DESCRIBED IN SUBDIVISION ONE OF
THIS SECTION. IN ADDITION, WITHIN THE SAME TIME PERIOD, THE COMMISSIONER
SHALL CREATE A WEB SITE THAT CONTAINS THE SAME INFORMATION AND THE
NOTICE. SUCH NOTICE SHALL BE PROVIDED TO CONTRACTORS THROUGH DOWNLOADING
FROM THE WEB SITE.
4. CONTRACTORS IN THEIR AGREEMENTS WITH ALL SUBCONTRACTORS SHALL
REQUIRE THEM TO:
(A) PROVIDE THE NOTICE DESCRIBED IN THIS SECTION, AND
(B) PLACE THE NOTICE REQUIREMENT IN CONTRACTS WITH ANY LOWER TIER
SUBCONTRACTORS.
5. CONTRACTORS WHO VIOLATE THIS SECTION SHALL BE FINED:
(A) TWO THOUSAND DOLLARS PER INDIVIDUAL WHO IS NOT NOTIFIED; AND
(B) FIVE THOUSAND DOLLARS PER CONTRACT WITH A SUBCONTRACTOR OR LOWER
TIER SUBCONTRACTOR THAT DOES NOT CONTAIN THE NOTICE REQUIREMENT.
S 861-E. VIOLATIONS. A CONTRACTOR IS GUILTY OF VIOLATING THE
PROVISIONS OF SECTION EIGHT HUNDRED SIXTY-ONE-C OF THIS ARTICLE WHEN HE
OR SHE FAILS TO PROPERLY CLASSIFY AN INDIVIDUAL AS AN EMPLOYEE.
S 861-F. ENFORCEMENT AND PENALTIES. 1. FOR THE PURPOSES OF THIS
SECTION:
(A) THE TERM "WILLFUL VIOLATION" SHALL MEAN A CONTRACTOR WHO KNEW OR
SHOULD HAVE KNOWN THAT HIS OR HER CONDUCT WAS PROHIBITED BY THIS
SECTION;
(B) THE TERM "DEBARMENT" SHALL MEAN DEBARMENT FROM BIDDING ON ANY AND
ALL STATE, MUNICIPAL OR PUBLIC AUTHORITY PUBLIC WORKS PROJECTS.
2. ANY CONTRACTOR WHO FAILS TO CLASSIFY AN INDIVIDUAL AS AN EMPLOYEE
ACCORDING TO THIS ARTICLE, IN ANY RESPECT, SHALL BE SUBJECT TO CRIMINAL
AND CIVIL REMEDIES. THE PENALTIES AND FINES TO BE IMPOSED ON A CONTRAC-
TOR FOR VIOLATIONS OF THIS ARTICLE ARE AS FOLLOWS:
(A) WHEN A CONTRACTOR WILLFULLY VIOLATES THE PROVISIONS OF THIS CHAP-
TER FOR A FIRST VIOLATION THE CONTRACTOR SHALL PAY A CIVIL PENALTY OF
TEN THOUSAND DOLLARS PER EMPLOYEE.
(B) WHEN A CONTRACTOR WILLFULLY VIOLATES THE PROVISIONS OF THIS CHAP-
TER FOR A SUBSEQUENT VIOLATION THE CONTRACTOR SHALL PAY A CIVIL PENALTY
OF TWENTY THOUSAND DOLLARS PER EMPLOYEE.
S. 6194 4
3. IN ADDITION TO CIVIL PENALTIES, THE CRIMINAL PENALTIES IMPOSED ON A
CONTRACTOR WHO WILLFULLY VIOLATES THE PROVISIONS OF THIS CHAPTER SHALL
BE A MISDEMEANOR AND UPON CONVICTION SHALL BE PUNISHED FOR A FIRST
OFFENSE BY IMPRISONMENT FOR NOT MORE THAN THIRTY DAYS AND FOR A SUBSE-
QUENT OFFENSE BY IMPRISONMENT FOR NOT MORE THAN SIXTY DAYS.
4. IF THE CONTRACTOR IS A CORPORATION, ANY OFFICER OF SUCH CORPORATION
OR SHAREHOLDER WHO OWNS OR CONTROLS AT LEAST TEN PERCENT OF THE
OUTSTANDING STOCK OF SUCH CORPORATION WHO KNOWINGLY PERMITS THE CORPO-
RATION TO WILLFULLY VIOLATE THE PROVISIONS OF THIS CHAPTER SHALL ALSO BE
IN VIOLATION OF THIS CHAPTER AND THE CIVIL AND CRIMINAL PENALTIES HEREIN
SHALL ATTACH TO SUCH OFFICER UPON CONVICTION.
5. ANY CONTRACTOR THAT WILLFULLY VIOLATES THE PROVISIONS OF THIS CHAP-
TER AND SUCH VIOLATIONS RESULT IN A FAILURE TO PAY ANY OTHER STATUTORY
PAYMENT OR COVERAGE OBLIGATIONS, INCLUDING BUT NOT LIMITED TO, UNEMPLOY-
MENT INSURANCE, WORKERS' COMPENSATION INSURANCE, OR BUSINESS OR PERSONAL
INCOME TAX SHALL BE SUBJECT, AT THE DISCRETION OF THE COMMISSIONER, TO
ADDITIONAL CIVIL PENALTIES AS FOLLOWS:
(A) FOR A FIRST OFFENSE UP TO AN ADDITIONAL FIFTEEN THOUSAND DOLLARS
PER EMPLOYEE; AND
(B) FOR A SUBSEQUENT OFFENSE UP TO AN ADDITIONAL THIRTY THOUSAND
DOLLARS PER EMPLOYEE.
6. ANY CONTRACTOR OR ANY OFFICER OR SHAREHOLDER WHO OWNS OR CONTROLS
AT LEAST TEN PERCENT OF THE OUTSTANDING STOCK OF SUCH CORPORATION THAT
HAS BEEN CONVICTED OF A FELONY OFFENSE FOR CONDUCT RELATING TO THE
MISCLASSIFICATION OF AN EMPLOYEE SHALL BE SUBJECT TO DEBARMENT AND BE
INELIGIBLE TO SUBMIT A BID AND/OR BE AWARDED ANY PUBLIC WORKS CONTRACT
WITH THE STATE, ANY MUNICIPAL CORPORATION, PUBLIC BENEFIT CORPORATION OR
PUBLIC BODY FOR A PERIOD OF FIVE YEARS FROM THE DATE OF CONVICTION.
7. NOTHING IN THIS SECTION SHALL LIMIT THE AVAILABILITY OF OTHER REME-
DIES AT LAW OR IN EQUITY.
S 861-G. ADVISORY COMMITTEE ON CONSTRUCTION INDUSTRY CLASSIFICATION.
1. THERE IS HEREBY ESTABLISHED THE ADVISORY COMMITTEE ON EMPLOYEE CLAS-
SIFICATION. THE MISSION OF SUCH ADVISORY COMMITTEE IS TO DEVELOP RECOM-
MENDATIONS FOR A COMPREHENSIVE AND STRATEGIC STATEWIDE APPROACH TO
ADDRESSING THE PROBLEM OF EMPLOYEE MISCLASSIFICATION AND TO ENSURE
CONTRACTOR COMPLIANCE WITH THIS ARTICLE.
2. THE ADVISORY COMMITTEE SHALL BE COMPOSED OF THE COMMISSIONER OR A
DESIGNEE, SERVING EX OFFICIO; THE ATTORNEY GENERAL OR A DESIGNEE, SERV-
ING EX OFFICIO; THE COMMISSIONER OF TAXATION AND FINANCE, SERVING EX
OFFICIO; THE CHAIR OF THE WORKERS' COMPENSATION BOARD; THIRTEEN MEMBERS
SHALL BE APPOINTED BY THE GOVERNOR AND SHALL SERVE AT HIS OR HER PLEAS-
URE AS FOLLOWS: THREE REPRESENTATIVES FROM THREE DIFFERENT BUILDING
TRADES UNIONS; THREE REPRESENTATIVES OF THE NEW YORK AFL-CIO; THREE
REPRESENTATIVES OF THE BUSINESS COMMUNITY; ONE REPRESENTATIVE OF RESI-
DENTIAL DEVELOPERS; ONE REPRESENTATIVE OF RESIDENTIAL CONSTRUCTION
CONTRACTORS; ONE REPRESENTATIVE OF COMMERCIAL DEVELOPERS; AND ONE REPRE-
SENTATIVE OF COMMERCIAL CONSTRUCTION CONTRACTORS.
3. THE COMMISSIONER SHALL SERVE AS THE CHAIR OF THE ADVISORY COMMIT-
TEE. ALL PUBLIC MEMBERS OF THE ADVISORY COMMITTEE SHALL SERVE WITHOUT
COMPENSATION. VACANCIES ON THE ADVISORY COMMITTEE SHALL BE FILLED IN THE
SAME MANNER AS THE ORIGINAL APPOINTMENT.
4. IN FURTHERANCE OF ITS MISSION STATED IN SUBDIVISION ONE OF THIS
SECTION, THE ADVISORY COMMITTEE SHALL BE AUTHORIZED TO:
(A) MAKE RECOMMENDATIONS TO THE DEPARTMENT, THE ATTORNEY GENERAL, THE
DEPARTMENT OF TAXATION AND FINANCE AND THE WORKERS' COMPENSATION BOARD
S. 6194 5
WITH RESPECT TO SYNCHRONIZING EACH RESPECTIVE DEPARTMENT'S REGULATIONS
AND POLICIES REGARDING EMPLOYEE MISCLASSIFICATION;
(B) MAKE RECOMMENDATIONS TO ENHANCE MECHANISMS FOR IDENTIFYING EMPLOY-
EE MISCLASSIFICATION WHERE IT DOES OCCUR;
(C) WORK WITH BUSINESS, LABOR AND COMMUNITY GROUPS TO DEVELOP EDUCA-
TIONAL MATERIALS THAT DISTINGUISH THE DIFFERENCE BETWEEN AN INDEPENDENT
CONTRACTOR AND AN EMPLOYEE; AND
(D) COOPERATE WITH STATE, FEDERAL AND LOCAL SOCIAL SERVICES AGENCIES
TO IDENTIFY WAYS TO PROVIDE ASSISTANCE TO VULNERABLE POPULATIONS THAT
HAVE BEEN EXPLOITED BY EMPLOYEE MISCLASSIFICATION, INCLUDING, BUT NOT
LIMITED TO, IMMIGRANT WORKERS.
5. THE ADVISORY COMMITTEE SHALL ISSUE A REPORT ANNUALLY TO THE GOVER-
NOR ON THE STATUS OF IMPLEMENTATION OF THIS ARTICLE, TO INCLUDE PUBLICLY
AVAILABLE INFORMATION REGARDING: CASES BROUGHT, WAGES AND TAXES RECOV-
ERED ON BEHALF OF THE STATE, OUTCOMES OF CASES, LEGAL OR ADMINISTRATIVE
BARRIERS TO SUCCESSFUL IMPLEMENTATION, A REVIEW OF THE PROCESS USED TO
ADJUDICATE MISCLASSIFICATION CASES, AND PROPOSALS FOR ANY ADDITIONAL
LEGISLATIVE ACTION THAT MAY BE NEEDED TO ENHANCE THE STATE'S EFFORTS TO
ADDRESS EMPLOYEE MISCLASSIFICATION IN THE CONSTRUCTION INDUSTRY AND ANY
OTHER INDUSTRY IN THE STATE.
6. THE ADVISORY COMMITTEE IS AUTHORIZED TO CALL UPON ANY DEPARTMENT,
OFFICE, DIVISION OR AGENCY OF THIS STATE TO SUPPLY IT WITH DATA AND
OTHER INFORMATION, PERSONNEL OR ASSISTANCE AVAILABLE TO SUCH AGENCY AS
THE ADVISORY COMMITTEE DEEMS NECESSARY TO DISCHARGE ITS DUTIES UNDER
THIS ARTICLE. EACH DEPARTMENT, OFFICE, DIVISION OR AGENCY OF THIS STATE
IS HEREBY REQUIRED, TO THE EXTENT NOT INCONSISTENT WITH LAW, TO COOPER-
ATE FULLY WITH THE ADVISORY COMMITTEE AND TO FURNISH THE ADVISORY
COMMITTEE SUCH ASSISTANCE ON AS TIMELY A BASIS AS IS NECESSARY TO ACCOM-
PLISH THE PURPOSES OF THIS ARTICLE. THE ADVISORY COMMITTEE MAY CONSULT
WITH EXPERTS OR OTHER KNOWLEDGEABLE INDIVIDUALS IN THE PUBLIC OR PRIVATE
SECTOR ON ANY ASPECT OF ITS MISSION.
S 861-H. RETALIATION. 1. IT IS AN INTENTIONAL VIOLATION OF THIS ARTI-
CLE FOR AN EMPLOYER OR ENTITY, OR ANY AGENT OF AN EMPLOYER OR ENTITY, TO
RETALIATE THROUGH DISCHARGE OR IN ANY OTHER MANNER AGAINST ANY PERSON
FOR EXERCISING ANY RIGHTS GRANTED UNDER THIS ARTICLE. SUCH RETALIATION
SHALL SUBJECT AN EMPLOYER OR ENTITY TO CIVIL PENALTIES PURSUANT TO THIS
ARTICLE OR A PRIVATE CAUSE OF ACTION, OR BOTH.
2. IT IS AN INTENTIONAL VIOLATION OF THIS ARTICLE FOR AN EMPLOYER OR
ENTITY TO RETALIATE AGAINST A PERSON FOR:
(A) MAKING A COMPLAINT TO AN EMPLOYER OR ENTITY, TO A CO-WORKER, TO A
COMMUNITY ORGANIZATION, BEFORE A PUBLIC HEARING, OR TO A STATE OR FEDER-
AL AGENCY THAT RIGHTS GUARANTEED UNDER THIS ARTICLE HAVE BEEN VIOLATED;
(B) CAUSING TO BE INSTITUTED ANY PROCEEDING UNDER OR RELATED TO THIS
ARTICLE; OR
(C) TESTIFYING OR PREPARING TO TESTIFY IN AN INVESTIGATION OR PROCEED-
ING UNDER THIS ARTICLE.
S 2. The state finance law is amended by adding a new section 99-t to
read as follows:
S 99-T. CONSTRUCTION INDUSTRY CLASSIFICATION FUND. 1. THERE IS HEREBY
ESTABLISHED IN THE JOINT CUSTODY OF THE STATE COMPTROLLER AND THE
COMMISSIONER OF TAXATION AND FINANCE AN ACCOUNT IN THE MISCELLANEOUS
SPECIAL REVENUE FUND TO BE KNOWN AS THE "CONSTRUCTION INDUSTRY CLASSI-
FICATION FUND".
2. THE CONSTRUCTION INDUSTRY CLASSIFICATION FUND SHALL CONSIST OF ALL
MONEYS RECEIVED BY THE STATE AS FEES AND CIVIL PENALTIES PURSUANT TO
ARTICLE TWENTY-FIVE-B OF THE LABOR LAW.
S. 6194 6
3. SUCH FUND SHALL BE SUBJECT TO APPROPRIATION BY THE DEPARTMENT OF
LABOR FOR ADMINISTRATION, INVESTIGATION AND OTHER EXPENSES INCURRED IN
CARRYING OUT ITS POWERS AND DUTIES PURSUANT TO ARTICLE TWENTY-FIVE-B OF
THE LABOR LAW. THE DEPARTMENT OF LABOR MAY HIRE AS MANY INVESTIGATORS
AND OTHER PERSONNEL AS MAY BE NECESSARY. ANY MONEYS IN THE FUND AT THE
END OF THE FISCAL YEAR IN EXCESS OF ANY MONEYS NECESSARY FOR THE DEPART-
MENT OF LABOR TO CARRY OUT ITS POWERS AND DUTIES UNDER ARTICLE
TWENTY-FIVE-B SHALL BE AVAILABLE TO THE DEPARTMENT OF LABOR FOR THE NEXT
FISCAL YEAR FOR ANY OF THE DEPARTMENT OF LABOR'S DUTIES.
S 3. Notwithstanding any other provision of the law to the contrary,
the provisions of section eight hundred sixty-one-c of the labor law
shall apply to and be utilized for all determinations of a construction
industry individuals' employment status under the labor law, the work-
ers' compensation law, the tax law or any other law.
S 4. This act shall take effect on the sixtieth day after it shall
have become a law.
