If you are an employer in New York State, you are subject to the NY Unemployment Insurance Law except for minor exceptions. It is important to understand your obligations and responsibilities (ideally) before you are audited or sued by a former employee in an employment law claim, both of which can be distracting and expensive for a business. It has been estimated that NYS conducts over 10,000 audits per year and employers can face tens of thousands of dollars in monetary exposure. Our experienced Award Winning NYS Employment Law Attorney has counseled employers regarding preventative issues and defense issues. Contact our office for a confidential consultation to understand your situation. Possible areas of exposure can include misclassification of your workers (improperly treated an independent contractors), paying your employees off the books, etc. It is important to get counsel before you classify a worker because the consequences can often impact a group of employees and have significant penalties and fines. Furthermore, the audit can trigger additional governmental inquiries (IRS, NYS Labor Department Labor Standards Division which handles minimum wage and overtime complaints, etc.) In short, this is something companies should try to get in front of and if that is not possible – companies should examine their legal exposure quickly and make any corrections to their practices if necessary. Lack of knowledge or an innocent error is not necessarily a defense in a misclassification case.
Section 575 of the New York State Unemployment Insurance Law requires that every employer keep records of each person in its employ, including the name, social security number, and the amount of remuneration paid to each, and that such records shall be open to inspection at any time and as often as necessary by duly authorized representatives of the Commissioner of Labor.
The law further provides under Section 571 that if an employer fails to file a report for the purpose of determining the amount of contributions due, the Commissioner of Labor shall determine the amount of contributions due on the basis of such information as the Commissioner is able to obtain and shall then give written notification of such determination to the employer.
An employer may seek to contest the initial determination. That strategy depends on the nature of the decision and extent of the exposure.
In addition, Section 570.4 of the UI Law provides that if any part of any deficiency is due to an intent to avoid payment of contributions to the Fund, 50% of the total amount of the deficiency, in addition to the deficiency itself, shall be assessed, collected, and paid in the same manner as it if it were a deficiency. This is a significant hammer for many businesses who pay their employees off the books. It can be a painful reminder that compliance with the labor law is a must.
First steps are critical in audits. An initial error can be costly and difficult to correct. Contact us to learn your options and rights at the outset. We have also advised clients on how to develop best practices moving forward.