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Ask the Lawyer

Employment Law

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Q: I run a small trucking business and my drivers are paid as independent contractors. I understand there is a new law in New York that might require me to treat them as employees. What is this all about?

A: You are indeed correct. On January 14, 2014, Governor Cuomo signed the New York State Commercial Goods Transportation Industry Fair Play Act.(the “Act”) The Act takes effect on March 11, 2014. The law provides that a “commercial good transportation contractor, which is any sole proprietorship, partnership, corporation, limited liability company, association or other legal entity authorized to do business within the state of New York, that compensates commercial drivers, who have a commercial driver’s license, to transport goods in the state of New York will be presumed to be employees, and not independent contractors, unless certain criteria are met.”

To be classified as an independent contractor the worker must meet all three of the following criteria: (1) the individual must be contractually and factually free from control and direction while performing the job, (2) the service must be performed outside the usual course of business for which service is performed, and (3) the individual must be customarily engaged in independently established trade, occupation, profession or business that is similar to the service at issue. The act also provides an eleven (11) prong test to be met for the driver to be considered a “separate business entity.” One more bit of detail, while the law was originally only to be applied to business which operate trucks weighing more than 26,000 pounds, that level was dropped to those who drive trucks more than 10,000 pounds. The statute will not apply to vans and other smaller vehicles that small businesses typically use in their operations.

This is all in response to a push in the last several years to correct “misclassification” of workers so that they could qualify as employees subject to all of the benefits afforded to an employee and more taxes to the state. It is important for any employer who works in the trucking industry to fully comply with the new law because the penalties of the failure to do so are daunting. If the employer "willfully violates" the Act when the contractor knew or should have known that he or she was committing a violation the Act provides for civil penalties of up to $2,500 per misclassified employee for the first violation, and up to $5,000 for each subsequent misclassification within a five-year period and the owner may be personally liable. Additionally, the Act contains criminal penalties including imprisonment for not more than thirty (30) days or a fine not to exceed $25,000 for the first violation, and imprisonment for not more than sixty days or a fine not to exceed $50,000 for each subsequent offense. There could also be Worker’s Compensation and tax implications associated with a failure to comply. So be forewarned.

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