NY Department of Labor Releases New Standards on Driver Classification

The New York Department of Labor yesterday released new standards to help employers determine whether a commercial truck driver should be classified as an employee or an independent contractor.

The newly released standards are part of a new bill Governor Cuomo signed into law on January 10, 2014 called the New York State Commercial Goods Transportation Industry Fair Play Act.  The law officially went into effect on April 10, 2014.

“The trucking industry is vital to how our state operates, from shipping materials that make our buildings, to parts and systems that keep us safe, to the food and products we use every day,” said Commissioner Rivera. “For too long, truck drivers have sought to have a clear standard. This law provides clarity for employers and truckers.

The law also addresses new penalties for employers who fail to properly classify their employees.

New York’s Joint Enforcement Task Force on Employee Misclassification (JETF) will be tasked with enforcing the law.  JETF is a partnership between the New York Sate Department of Labor, Workers’ Compensation Board and other agencies.  JETF will investigate reports of misclassification and fraud.

Employers caught violating the Commercial Goods Transportation Industry Fair Play Act will face up to a $2,500 fine per misclassified employe for a first violation, up to $5,000 per misclassified employee for future misclassifications.

In addition, for a first offense, an employees may also face up to 30 days in jail or up to a $25,000 fine. Repeat offenders may face up to 60 days in jail or a fine of up to $50,000.

“The Fair Play Act is a major victory for truck drivers, port communities and the environment,” said Matt Ryan, Executive Director of ALIGN. “Ending the rampant misclassification of these workers as independent contractors will give thousands of drivers a shot at the middle class, hold the trucking industry accountable for replacing old polluting trucks, and reduce pollution in New York’s communities.”

From the New York Department of Labor- 

Defining Who Is An Employee

An employee treated incorrectly as an independent contractor is considered misclassified. Misclassification denies workers rightful benefits such as unemployment and workers’ compensation insurance, as well as wage standards and other rights. Misclassified employees can be denied a fair opportunity to form or join unions. Misclassification rates are disproportionately high in the trucking industry.

A legal independent contractor must be reported on a federal income tax form 1099. In addition, they must be defined as a separate business entity or they must be:

1. Free from control and direction in performing the job, both under contract and in fact;
2. Performing services outside of the usual course of business for the employer; and
3. Engaged in an independently established trade, occupation or business that is similar to the service they perform.

A legal, separate business entity is a sole proprietor, partnership, corporation or other entity that meets 11 criteria under the new law. It must: 

1. Be free from direction or control by the contractor over the means and manner of providing the service. The contractor may only specify the desired result of the work or provide direction required by federal rule or regulation;
2. Not be subject to cancellation or destruction when its work with the contractor ends;
3. Have invested substantial capital in its business entity beyond ordinary tools and equipment;
4. Own or lease the capital goods, gain the profits and bear the losses of the business entity;
5. Make its services available to the general public or others in the business community not a party to the business entity’s written contract on a continuing basis;
6. If required by law, provide services reported on a federal income tax form 1099;
7. Perform services for the contractor under a written contract and under the business entity’s name. The contract must state that the relationship between the contractor and the business entity is that of independent contractors or separate business entities;
8. Obtain and pay for any required license or permit in the entity’s own name or, if allowed by law, pay for the use of the contractor’s license or permit;
9. Hire its own employees without contractor approval and pay those employees without reimbursement from the contractor;
10. Not represent the business entity or employees of the business entity as its own employees to the contractor’s customers; and
11. Have the right to perform similar services for others on whatever basis and whenever it chooses.

More information about the Commercial Goods Transportation Industry Fair Play Act is available online:www.labor.ny.gov/transportationfairplay.

Anyone with questions or who wishes to report suspected misclassification related to the Commercial Goods Transportation Industry Fair Play Act should e-mail: dol.misclassified@labor.ny.gov or call 1-866-435-1499 toll-free.

Accolades for The Fair Play Act: 

George Miranda, President, Teamsters Joint Council 16, said, “For too long, New York’s roads and highways were a race to the bottom for commercial drivers. Freight and delivery companies played fast and loose with their employees and got away with it. But no more. The Commercial Goods Transportation Industry Fair Play Act ensures that employee rights are protected. Thank you to Senator Savino and Assemblyman Wright for carrying this law through the legislature and to Governor Cuomo for getting it across the finish line. With the enforcement and education efforts announced today, we will ensure that this law marks a turning point for New York workers.”

Mario Cilento, President, New York State AFL-CIO, said, “The Commercial Goods Transportation Industry Fair Play Act leveled the playing field for workers, contractors and taxpayers by establishing a fair set of rules that everyone must play by.  But, like all laws, it will only be effective if companies comply and if there is enforcement when bad actors fall out of line. That’s why the enforcement initiatives announced by DOL today are so critical to the success of this landmark law, and ultimately the future of the industry.”

“The New York State Motor Truck Association has long recognized the need for a clear definition of an independent contractor specific to the transportation industry,” said New York State Motor Truck Association President Kendra Hems. “This legislation not only provides such a definition, but takes into consideration the unique characteristics of the transportation industry, enabling true independent contractors to continue working as such without being subject to a ‘one-size-fits-all’ definition.”

State Senator Diane Savino (D-Staten Island and Brooklyn) said, “I am pleased that the Administration and the Department of Labor are taking swift action to enforce this law.  I am sure they will find what we knew to be true when writing the law, that workers are continually misclassified as independent contractors.  This hurts the worker through loss of pay, benefits and other protections; and it hurts the good actors in the field who properly classify their workers and provide the appropriate pay, benefits and protections.”

“Misclassification is one of the biggest threats facing workers today. It is indisputable that employers who intentionally misclassify workers deliberately try to strip the protections and benefits that the Legislature has expressly provided for employees,” said Assemblyman Keith Wright (D-Manhattan), who sponsored the bill in the Assembly. “This bill ensures that every New Yorker who performs work transporting commercial goods will be appropriately classified.”