New York State Enacting Misclassification Law

If you are a regular reader of FoxHire‘s blog, you are already well aware of the dangers of misclassifying W-2 Employees as Independent Contractors and the Obama administration’s enforcement crackdown. But federal law is not all employers need to worry about. States are also cracking down on misclassification, and in the case of New York State, are even putting new laws in place to prevent it.According to a recent Wage & Hour Counsel blog entry, the New York State Construction Industry Fair Play Act will be enacted on October 26, 2010. It states that construction workers will automatically be presumed to be employees unless they are a separate business entity or meet the following criteria:

• They are free from control and direction in performing the job.
• The service is performed outside the usual course of business.
• They are “customarily engaged in an independently established trade, occupation, profession, or business that is similar to the service at issue.”

The civil penalties for violations are $2,500 for first time violations and up to $5,000 for additional violations. Employers could also be found guilty of a criminal misdemeanor punishable by a fine of $25,000 to $50,000 and a prison stay of 30-60 days.While it is unlikely that the contractors you are placing are in the construction field, it is worth mentioning to your clients who are tempted to use Independent Contractors that they could be hit by both federal and state law violations if they do it wrong!