New York Independent Contractor Law

Businesses that contract out work in New York have a new law to put on their radar: The New York independent contractor law. But, what is the new law? What businesses are impacted by the new law, and how? Keep reading to get the scoop on the New York independent contractor law.

What is the New York independent contractor law?

Officials in New York created the independent contractor law to combat wage theft among contractors. This new law is also known as the Construction Industry Fair Play Act.

The new legislation gives contractors joint and several liability (explained below) for ensuring that employees of subcontractors receive wages owed. Under this new law, contractors may demand payroll information from their subcontractors. And, contractors may withhold payment if the subcontractor does not provide the requested payroll information.

Contractors are now jointly liable and responsible for unpaid wages, benefits, and wage supplements for the employees of their subcontractors. This responsibility includes employees of subcontractors under any tier.

There is a three-year statute of limitations on claims against contractors for any violations under the new law.

What is joint and several liability?

Joint and several liability is a law that makes all parties in a suit responsible for any damages up to the entire amount owed. When a contractor assumes joint and several liability for their subcontractor’s employees, they are equally but separately liable for the claims brought forth by the employee.

How is the new law different from the previous law?

Prior to the new law, contractors were not liable for the wage information and distribution of their subcontractor’s employees. The only time a contractor was liable for employee wages was when an employment contract existed between the contractor and the employee of the subcontractor.

And, the prior laws did not require contractors to review and maintain records for the employees of subcontractors.

When does the new contractor law go into effect?

The new law goes into effect 120 days after it formally becomes law. And, the new law applies to all construction contracts entered into, modified, amended, or renewed after the date.

Currently, the effective date is January 4, 2022.

Who are employees under the new law?

New York released a required notice for Article 25-B of the Labor Law that details who is an employee and who is a contractor.

The notice specifies that individuals are employees unless they meet all three of the following:

Are free from the direction and control in performing the job
Perform work not part of the usual work done by the business that hired the individual
Have an independently established business

Individuals who do not meet all three of the above requirements are employees under the law. As such, contractors are jointly liable for the employees of the contractors employing the individuals.

What are employees entitled to under the law?

Employees in New York are entitled to state and federal worker protections, including:

Unemployment insurance benefits
Workers’ compensation benefits
A safe work environment
Payment for all wages earned, minimum wage, and overtime (if applicable)
Prevailing wages on public work projects
All provisions of the National Labor Relations Act

With the New York independent contractor law, contractors must ensure that all employees of their subcontractors receive benefits and wages owed.

What claims are contractors responsible for under the new law?

Employees can bring claims against their subcontractor employer under the law, and the subcontractors’ contractors are liable for the claims, too. Claims include items such as unpaid:

Wages
Benefits (e.g., health or retirement)
Wage supplements (e.g., holiday or vacation pay)

If an employee brings a claim against their employer who was a subcontractor for another contractor, the contractor is also liable for the claim. However, the subcontractor has a statute of limitations of six years, while contractors have a statute of limitations for three years.

So, if an employee of a subcontractor files a claim against the subcontractor four years after, the contractor is no longer liable due to the statute of limitations.

Contractors cannot waive liability except under a collective bargaining agreement that specifically references NYLL §198-e. So, the law applies to all nonunion contracts with no exceptions.

What are contractors responsible for doing if claims are filed?

If an employee files a claim, the contractors are responsible for remedying the claim. Contractors may be responsible for paying one or all of the following if the claim is founded:

Expenses
An amount equal to 100% of unpaid wage as liquidated damages (or three times the amount for willful violations)
Attorney’s fees
Prejudgment interest
Up to a $5,000 penalty, plus costs and attorney’s fees if the contractor fails to provide the Wage Theft Protection Act notice
Up to a $5,000 penalty plus costs and attorney’s fees if the contractor fails to provide compliant wage statements
Attorney’s fees and costs in enforcement actions

What are the penalties for employee misclassification?

If an employer misclassifies an employee as an independent contractor or pays an employee off the books, the employer will face penalties. Again, the contractor is also responsible for ensuring subcontractors do not misclassify employees or pay them off the books.

There are two types of penalties for misclassification or off-book payments:

Civil penalty: Up to $2,500 per employee for the first offense. Up to $5,000 per employee for each additional offense.
Criminal penalty: Penalties differ depending on the number of offenses.
1. The first offense is a misdemeanor with up to 30 days in jail, up to a $25,000 fine, and barred from performing public work for up to one year.
2. Additional offenses are misdemeanors with up to 60 days in jail or up to a $50,000 fine and barred from performing public work for up to five years.

Consult the New York Department of Labor for more information regarding the law, employer responsibilities, and penalties.

This is not intended as legal advice; for more information, please click here.

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