Tuesday, September 21, 2010

A Death Knell For Independent Contractor Status?

On October 26, 2010, New York’s Construction Industry Fair Play Act (“CIFPA”) goes into effect. This new legislation was enacted due to the prevalence of worker misclassification in the construction industry, and represents a major change in how New York employers will classify independent contractors.

The statute creates a presumption of employee status in the construction industry, unless the person is a “separate business entity" (which requires satisfying all 12 criteria enumerated in the statute for that definition) or if three (3) other prescribed criteria are all met. Those criteria, as well as the text of the statute, can be found here. In short, well-recognized elements of employee status must be absent in order to be classified as a true independent contractor; this will require meeting all criteria set forth in one of CIFPA’s tests. It is irrelevant whether workers are bona fide independent contractors under the traditional common law test. Further, construction industry contractors will have to post a notice at each jobsite (which will be available from the New York State Department of Labor) containing information about employee rights under CIFPA (including anti-retaliation protections) and rights to workers' compensation coverage, unemployment insurance, minimum wage, overtime and the like.

CIFPA carries civil and criminal penalties both for the employer and for individual officers and shareholders who knowingly permit a willful violation of the statute. For those contractors performing public work, debarment and ineligibility to bid on public works contracts will be imposed upon a criminal conviction.

The bar for independent contractor status has been raised significantly, and it will likely be difficult to justify independent contractor status for most individual workers after CIFPA becomes effective.

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