Workers’ Compensation Information for Employers
Construction Industry Fair Play Act
New York State’s Construction Industry Fair Play Act (the Act) took effect on October 26, 2010. For the purposes of workers’ compensation, disability benefits, and Paid Family Leave, the Act applies to all accidents on or after that date.
Any worker who was injured on or after October 26, 2010, while performing services for a contractor, is presumed to be the employee of that contractor for the purposes of workers’ compensation, disability benefits, and Paid Family Leave, subject to the independent contractor test contained in the statute and outlined below.
Under the Act, a person working for an employer in the construction industry is only an independent contractor if they meet a two-part test:
- An individual is an independent contractor if an employer can prove ALL three of the following criteria:
- The individual is free from control and direction in performing their job.
- The individual is performing services outside the usual course of business for the employer.
- The individual is engaged in an independently established trade, occupation or business that is similar to the service they perform.
- A sole proprietor, partnership, corporation or other entity is an entity separate from the contractor, only if it meets ALL twelve of the following criteria:
- Perform the service free from direction or control, subject only to the right of the contractor to specify the desired result
- Is not subject to cancellation when its work with the contractor ends
- Has a substantial investment of capital in the entity beyond ordinary tools and equipment and a personal vehicle
- Owns the capital goods, gains the profits and bears the losses of the entity
- Makes its services available to the general public or business community on a regular basis
- Includes the services provided on a federal income tax schedule as an independent business
- Perform the services under the entity's name
- When the services being provided require a license or permit, the business entity obtains and pays for the license or permit in the business entity's name;
- Furnishes the tools and equipment necessary to provide the service
- Hire its own employees without contractor approval, pays the employees without reimbursement from the contractor and reports the employees' income to the Internal Revenue Service
- Has the right to perform similar services for others on whatever basis and whenever it chooses
- Does not represent the entity or the employees of the entity as its own employees to its customers
Transportation Industry Fair Play Act
Under the Commercial Goods Transportation Industry Fair Play Act, a driver who possesses a state-issued driver's license and who transports goods in the state of New York while operating a commercial motor vehicle as defined in Labor Law Section 862-a(3) is presumed to be the employee of a commercial goods transportation contractor who compensates the driver. The driver is only considered an independent contractor if they meet a two-part test:
- A driver is an independent contractor if the alleged employer is required to report payment for their services on a federal income tax Form 1099 (if required by law), and ALL three of the following criteria are met:
- Driver is free from control and direction in performing their job
- Driver performs services outside the usual course of business for the employer
- Driver is engaged in an independently established trade, occupation or business that is like the service they perform
- A sole proprietor, partnership, firm, corporation limited liability company, association, or other legal entity that may also be considered a commercial goods transportation contractor is a separate business entity only if it meets ALL eleven of the following criteria:
- Perform the service free from the direction or control over the means and manner of providing the service, subject only to the right of the commercial goods transportation contractor to specify the desired result or federal rule or regulation
- Is not subject to cancellation or destruction when its work with the commercial goods transportation contractor ends
- Has a substantial investment of capital in the entity, including but not limited to ordinary tools and equipment
- Owns or leases the capital goods and gains the profits and bears the losses of the entity
- Has the option to make its services available to the general public or others not a party to the business entity's written contract set forth in item seven in this list, on a regular basis
- Provides services reported on a federal income tax Form 1099, if required by law
- Perform the services pursuant to a written contract, under the entity's name, specifying that it is an independent contractor or a separate business entity from the commercial goods transportation contractor
- Pays for any required license or permit in the entity's name or where permitted by law, pays for reasonable use of the commercial goods transportation contractor's license or permit
- Hires its own employees without the commercial goods transportation contractor's approval, subject to reimbursement from the commercial goods transportation contractor
- Is not required by the commercial goods transportation contractor to represent itself as an employee of the commercial goods transportation contractor to its customers
- Has the right to perform similar services for others on whatever basis and whenever it chooses
All other industries
An individual outside the construction and transportation industries may be an independent contractor if they:
- Perform the service free from direction or control, subject only to the right of the contractor to specify the desired result
- Obtained their own Federal Employer Identification Number (FEIN) or have filed business or self-employment income tax returns based on work or service performed in the previous calendar year,
- Maintain a separate business establishment,
- Perform work different from that of the hiring business and works for other businesses,
- Are responsible for performing satisfactorily under a specific contract and is in a position to succeed or fail if the business' expenses exceed its income,
- Obtain a liability insurance policy (and if appropriate, workers' compensation and disability benefits insurance policies) under its own legal business name and federal employer identification number,
- Have recurring business liabilities and obligations,
- Advertise their own business,
- Provide all equipment and materials necessary to fulfill the contract, or
- Work under their own operating permit, contract or authority.
A business cannot require employees working for that business to obtain their own workers' compensation insurance policy or contribute towards a workers' compensation insurance policy.
However, a business may require an independent business that has its own employees to obtain a workers' compensation insurance policy if the independent business is working as a subcontractor. An independent business usually has characteristics such as media advertising, commercial telephone listing, business cards, business stationary or forms, its own Federal Employer Identification Number (FEIN), working under its own permits or operating authority, business insurance (liability & WC), and/or maintaining a separate establishment. The independent business has a significant investment in facilities and means of performing work.
In many instances, individuals alleged to be subcontractors have been determined by the Board, acting in its adjudicatory capacity, to be employees when such individuals have been injured and have filed claims against the general contractor. As a result, insurance carriers often assess general contractors premiums for coverage of all "subcontractors" on the job site, unless the subcontractors furnish proof that they have their own workers' compensation insurance policy. Accordingly, general contractors routinely require that subcontractors provide proof of their own workers' compensation coverage in order to co-work on the job. This results in many sole proprietors, partnerships, and one or two-person owned corporations with no employees who are not otherwise legally required to acquire a workers' compensation policy, being required to purchase a policy (and include themselves in that policy) in order to work for a particular general contractor.