Many people that once dreamed of being their own boss could now have a big problem on their hands. And many businesses that rely on those individuals to help carry out operations could be in the same boat.
This week the US Department of Labor and NYS Attorney General Eric Schneiderman’s office signed a Memorandum of Understanding to ‘protect the rights of employees’ by preventing the misclassification of independent contractors. This means that businesses in New York can expect greater scrutiny, and some hefty fines are likely to come down.
Although there are some bad actors that purposely misclassify employees to avoid taxation and regulation, this aggressive campaign by the feds and the AG’s Office will cast a wide net and lump together those that made honest mistakes with the bad actors. Legitimate independent contractors— from truck drivers to personal trainers to hair stylists—have reason to be concerned because the employer-employee relationship can be unclear, and standards are “amorphous,” as a recent Forbes article noted.
This isn’t the first time that the State has taken measures with respect to classification of employees. New York State enacted legislation in 2010 entitled the New York State Construction Industry Fair Play Act that presumes workers in the construction industry are employees unless the employer proves otherwise. In the 2013, the New York State Commercial Goods Transportation Industry Fair Play Act called for independent contractor tests that, when applied to the trucking industry, would effectively eliminate the owner-operator business model.
The trucking bill stalled in the previous legislative session, which gives the State a chance to revisit the whole issue before continuing to adopt more piecemeal legislation to try to deal with the problem. In the meantime, the focused effort in coordination with the feds only adds to the State’s reputation for being over-regulated and having zealous enforcement.