Independent Contractor Or Employee? New York Employers Can Expect Increased Scrutiny

September 10, 2007

For years, labor organizations and employee advocacy groups have asserted that employers regularly misclassify individuals providing services as "independent contractors," rather than "employees," depriving these individuals of basic workplace rights and costing the government significant amounts of employee-based revenue, such as social security, workers' compensation and unemployment contributions. Further, they argue that such practices put "law-abiding" employers at a competitive disadvantage. This issue has been the subject of much discussion recently, including congressional hearings earlier this year. New York employers now must take specific note.

Following through on a campaign pledge, New York State Governor Eliot Spitzer has issued an Executive Order to form an interagency Task Force to help carry out his promise to focus on misclassification. The Task Force will include representatives from various New York state agencies that enforce relevant laws, including the Attorney General's Office, the Department of Taxation and Finance, the Workers' Compensation Board, the Workers' Compensation Inspector General and the New York City Comptroller's office. As stated in Governor Spitzer's press release, the Task Force's charge is to "strengthen enforcement and avoid duplication of efforts by sharing relevant information, coordinating investigations and enforcement actions, and educating the business community and the public at large."

By February 1^st of each year, the Task Force is required to issue an annual report "detailing its actions, and suggesting potential legislative or regulatory changes in this area." The Executive Order mandates state agencies to focus not only on enforcement (the press release noted a recent Cornell University study finding that in certain industries 10% or more of the workforce is misclassified), but also to share information regarding misclassification findings, thereby increasing potential employer liability. In the past, by state officers' own admission, intra-agency communication was minimal.

The Governor's action is a further indication that New York employers must review their classification practices in all respects. Jackson Lewis attorneys have significant experience both with advising employers on classification issues and defending employers' classification decisions in state audits and/or litigation. For further information about this unfolding initiative, and its implications for wage-hour and tax and benefits compliance, please contact the attorneys in the Firm's three New York offices identified on this page.

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