Worker Misclassification: Increased Audits and Penalties in New York State

New York State employers should be vigilant about the proper classification of workers as employees or independent contractors on a go-forward basis. Although businesses already may be aware of the 2007 Questionable Employment Tax Practices (QETP) state-federal initiative to crackdown on illegal tax schemes, the New York State Attorney General and US Department of Labor recently entered into an agreement that puts more employers under intense scrutiny.

This memorandum of understanding, signed in November 2013, facilitates the exchange of information and coordinates state-federal enforcement efforts against businesses that misclassify workers.  In conjunction with this information sharing program, the chief of the IRS Employment Tax Policy Section also announced a ramped up QETP initiative that kicked off  with a growing number of worker-classification audits starting this month.

Aggressive enforcement of labor laws targets employers that intentionally misclassify workers as independent contractors in an effort to cut costs including avoiding paying minimum wage, overtime, unemployment insurance and workers compensation, Social Security and payroll taxes. But employers that mistakenly misclassify workers also face stiff penalties. Labor attorneys warn that employers charged with misclassifying workers can face federal and state criminal charges, civil penalties and tax liabilities.

Classification of workers as employees or independent contractors in many cases can be complicated because of state and federal statutes and policies. The complexity causes some law-abiding employers to mistakenly classify workers, and it puts other law-abiding employers at an unfair competitive disadvantage as a result of higher costs. NFIB-NY is working with the Governor’s Office and other state agencies to gain additional clarification and guidance for employers.

For more information about the distinction between independent contractors and employees, please visit:
NFIB’s Workforce Issues: Independent Contractors and Consultants
New York State Department of Labor
US Department of Labor Wage and Hour Division

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About Mike Durant

Mike Durant was named New York State Director of NFIB in May 2011. Prior to joining NFIB as the Assistant State Director in May 2010, Durant began his career in the New York Senate working in the Office of Member Services. From there, he served in a number of positions during former New York Governor George E. Pataki’s administration. As a Research Specialist in the New York State Office of Demographic Policy, Mike was responsible for drafting a redistricting proposal for Governor Pataki. In addition, Mike served as a Research Specialist for the Empire State Development Corporation, as well as the Associate Commissioner of Human Resource Management with the New York Department of Labor. Durant also spent four years working at the Questar III BOCES as a specialist focusing on the complex formulas that drive aid to school districts across the state while also taking a lead role in the state legislative/budget process as it related to education policy. These past positions have given Mike a deep understanding of the complex political economics of the State of New York. Active in the community, Durant has served on a number of boards in both the village of Ballston Spa and Town of Milton. Durant received his bachelor’s degree from Siena College in Loudonville, New York and resides in Ballston Spa with his wife and two children.
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