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New York Attorney General Cracks Down on Construction Companies Misclassifying Workers

Former New York State Attorney General Eric T. Schneiderman collected over $7 million for construction workers in back wages during his tenure from 2011 to 2018. Most recently, the former New York State Attorney General obtained guilty pleas from three Queens-based construction companies for misclassifying over 150 workers as independent contractors rather than employees.  The plea agreements require the three business owners to pay a total of $371,447.01 for unpaid wages and $359,747.86 in unpaid unemployment contributions to the New York State Department of Labor. 

Misclassifying workers for purposes of wage and hour laws is a common problem for employers.  On a fundamental level, independent contractors are workers with economic independence who are in business for themselves.  Employees, on the other hand, are economically dependent on the business of the employer.  To make this assessment, the United States Department of Labor considers various factors such as: (1) the extent to which the work performed is an integral part of the employer’s business; (2) whether the worker’s managerial skills affect his or her opportunity for profit and loss; (3) the relative investments in facilities and equipment by the worker and the employer; (4) the worker’s skills and initiative; (5) the permanency of the worker’s relationship with the employer; and (6) the nature and degree of control by the employer. 

Despite considering these factors, state and federal agencies often take the position all workers are employees.  Therefore, it is difficult to prove a worker is an independent contractor rather than an employee.  For painters and carpenters who only work for one construction company, as was the case with the three Queens-based companies, it is very difficult to argue the workers are not employees.  Employers should routinely examine the classification of their workers to determine whether they are exempt versus non-exempt or employees versus independent contractors.  This continues to be an area of interest for state agencies like the New York Attorney General and federal agencies such as the U.S. Department of Labor.  Fair warning: an investigation by any of these agencies can be quite costly for an employer.  Take steps now to prepare for this.

Brody and Associates regularly advises management on complying with state and federal employment laws including wage and hour laws.  If we can be of assistance in this area, please contact us at info@brodyandassociates.com or 203.454.0560.