DATE: January 26, 2010
TO: Members of the New York State Assembly Standing
Committee on Labor
FROM: Richard T. Anderson, President
MEMORANDUM IN SUPPORT
The New York Building Congress, New York City’s largest and most diverse coalition serving the design, construction and real estate industry and involving 1,500 members from 400 constituent organizations, supports the goals of A.8237.
The “New York State Construction Industry Fair Play Act” amends existing provisions of law to prevent misclassification of laborers as “independent contractors.” The bill would create a presumption of employee status unless an employer met specific criteria for classifying a worker as an independent contractor and would establish penalties for classification violations.
Classification of construction industry workers as independent contractors can have significant impacts in this high-risk industry. Independent contractors are less able to access the standard protections and benefits that they are entitled to, such as workers compensation, healthcare, social security and other benefits typically provided by employers. This shifts healthcare costs to workers and taxpayers, and, in extreme cases, exposes workers to risk if, for financial reasons, they have not made the necessary contributions to these programs.
Moreover, classification of workers as independent contractors essentially allows a two-tiered industry, with businesses who pay required employee benefits and those that avoid these costs by using the independent contractor designation for their employees. This creates an uncompetitive environment by allowing businesses to submit lower bids by misclassifying their workers.
Misclassification further hurts taxpayers by reducing the amount of unemployment and workers compensation funds collected by the State. Some estimates reach as high as $4 billion in taxable wages that are underreported due to misclassification, resulting in an underreporting of over $175 million in unemployment tax.