New York recently enacted the "New York State Construction Industry Fair Play Act" which took effect on October 26, 2010. The law is enacted to address the problem of employee misclassification. Under this law a construction worker is presumed to be an employee as opposed to an independent contractor.
The worker may be considered an independent contractor only if the worker is a separate business entity, as defined by the law, or the worker: (1) is free from control and direction in performing the job, both under his or her contract and in fact; (2) the service performed is outside the usual course of business; and (3) the worker is customarily engaged in an independently established trade, occupation, profession, or business that is similar to the service at issue. The use of the phrase "and" requires that all three points of the test be met for contractor classification. As a result, the term employee gets a very broad definition.
The above test is commonly referred to as the "ABC" test for independent contractor status. It is used by various state agencies to define who is excluded from employee status for purposes of workers compensation or unemployment benefits or the like.
Penalties are laid out in the Act for paying off-the-books or misclassification of a worker. Those employers who willfully violate the law are subject to civil penalties of up to $2,500 for the first violation and up to $5,000 for each subsequent violation within a five year period. This penalty may be assessed for each worker who is misclassified. Additionally, employers who violate the law may be guilty of a criminal misdemeanor, and subject to imprisonment for up to 30 days or a fine up to $25,000 for the first offense, or imprisonment for up to 60 days or a fine up to $50,000 for a subsequent offense. If the employer is a corporation, any officer or shareholder who owns or controls 10% or more of the corporation and who knowingly allows a violation of the law, may also be subject to civil and/or criminal liability.
The new law also prohibits retaliation and has a provision which requires a notice posting. The New York State Department of Labor (NYSDOL) has issued the mandatory poster required to be displayed by covered employers.
New York construction industry employers must examine whether they are covered by the Act and how the Act's definition of "independent contractor" impacts their classification of workers. If they are covered they have to do the immediate posting of the NYSDOL poster.
Sources:
http://www.wageandhourlawupdate.com/2010/10/articles/states/new-york-state/new-york-construction-industry-misclassification-law-takes-effect-provisions-include-required-posting/
http://www.wageandhourcounsel.com/2010/09/articles/independent-contractor-issues/new-york-enacts-construction-industry-fair-play-act-to-address-employee-misclassification/
http://www.labor.ny.gov/sites/legal/laws/pdf_word_docs/Fair%20Play%20Act%20revision.pdf