New York Employment Lawyer Blog

The US Department of Labor has stated that the misclassification of employees as independent contractors is a primary enforcement initiative. In fact, the Secretary of the Labor Department, Thomas Perez, has referred to misclassification of workers as a “workplace fraud” and a practice that cheats the state out of revenue and deprives workers of basic rights including protection under employment discrimination statutes. As evidence of the government’s interest in stopping this practice, the federal agency’s budget in investigating misclassification cases is for FY 2016 is $14 million dollars and it has been working with many states as part of a joint task force. New York is part of the joint task force. The federal agency has recovered over 200 million dollars in 2014.

Employers and businesses in New York State should carefully evaluated their workforces to determine if they have properly classified their workers properly before an audit, investigation or lawsuit is commenced. Our NY Independent Contractor Misclassification Lawyer can assist you in your evaluation.
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Misclassification of workers in the healthcare field is a hot issue and it is an area where many practices make a misstep leading to potential exposure involving the Department of Labor (DOL). Many practices treat physicians, doctors, dentists, therapists or similar professionals as independent contractors instead of as employees. The New York State DOL can investigate your practice’s workforce classifications. Depending on the circumstances this can raise some legal concerns. The New York Court of Appeals decision, In Re Concourse Ophthalmology Associates P.C., 469 N.Y.S.2d 78 (1983) discusses the proper employment status for multiple ophthalmologists working in a professional corporation. The court issued the following test for medical providers in determining whether an employee-employer relationship exists for purposes of the Unemployment Insurance Law:
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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.

Companies who use freelancers, contractors, consultants, day laborers or any other workers who are not categorized as employees must exercise extreme caution. The NYS Labor Department and other agencies have stepped up their enforcement efforts to investigate companies’ practices and whether workers are properly classified in all industries. An innocent error can lead to a multitude of problems for businesses including but not limited to a class action lawsuit and monetary damages in the form of unpaid payroll-related taxes, unpaid overtime wages, and failure to provide employee benefits (vacation pay, health insurance, etc.) Companies should carefully examine a worker’s duties and determine the proper employment characterization before work is commenced. There are different rules that apply to employees and contractors. In general, employees are issued a W-2 tax form, provided with Wage Theft Prevention Act Notices and paid accordingly to applicable federal and state labor laws. Conversely, in general, contractors are issued a 1099 tax form, have some expertise, and are not supervised or controlled by the business.
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Have you received a notice from the NY Labor Department regarding an audit confirming your compliance with labor laws? Audits and investigations are on the rise. If you have received a notice, the first steps you take are critical to defending your business and protecting your interests.

1. Understand what the audit is about. Speak with an experienced employment lawyer first. We have represented small businesses and household employers in New York State and can help you understand the process.

2. Start gathering your documents and information together. Are your general ledger and payroll related documents in order for the past three years? Strong contemporaneous documentation can help you and conversely, the lack of records can be problematic for a number of reasons.

3. One of the main inquiries may be whether you used any independent contractors, paid workers off the books or misclassified any of your workforce?
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