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New York State
Workers' Compensation Board
OFFICE OF THE CHAIR
20 Park Street   Albany, New York 12207
Governor David A. Paterson


Subject No. 046-450

2010 Construction Industry Fair Play Act

To:  All Employers, Employees, Insurance Carriers Providing Benefits under the Workers' Compensation Law; Attorneys and Licensed Representatives Appearing Before the Board

Date:  December 24, 2010

Overview

On August 27, 2010, Governor Paterson signed into law the New York State Construction Industry Fair Play Act (Chapter 418). This new law amends the Labor Law and the Workers' Compensation Law to establish a presumption of employment in the construction industry. The new statute took effect on October 26, 2010, and for workers' compensation purposes, applies to accidents which occur on or after that date.

The heart of the new law is Labor Law § 861-C which provides that any person performing services for a contractor is presumed to be an employee of that contractor. Contractor is broadly defined to include any sole proprietor, partnership, firm, corporation, limited liability company, association or other legal entity permitted to do business within the state who engages in construction work. Labor Law § 861-C is incorporated by specific reference into Workers' Compensation Law § 2(4). Therefore, any worker performing services for a contractor who is injured on or after October 26, 2010, will be presumed the employee of that contractor for workers' compensation purposes, subject to the independent contractor test contained in the statute.

Application

Under the Fair Play Act, any person working in construction is presumed to be the employee of the person or business for whom he or she is working.

  1. For a person to be an independent contractor, the alleged employer must demonstrate ALL three of the following criteria:
    1. The person is free from control and direction in performing the job, both under contract and in fact,
    2. The person is performing services outside of the usual course of business for the company, and;
    3. The person is engaged in an independently established trade, occupation or business that is similar to the service s/he performs.
  2. The law also contains a 12-part test to determine when a sole proprietor, partnership, corporation or other entity will be considered a "separate business entity" from the contractor. If an entity meets ALL of the 12 statutory criteria, it will not be considered an employee of the contractor. Instead, it will be a separate business entity that is itself subject to the new law regarding its own employees. A separate business entity must:
    1. be performing the service free from the direction or control over the means and manner of providing the service subject only to the right of the contractor to specify the desired result;
    2. not be subject to cancellation when its work with the contractor ends;
    3. have a substantial investment of capital in the entity beyond ordinary tools and equipment and a personal vehicle;
    4. own the capital goods and gain the profits and bear the losses of the entity;
    5. make its services available to the general public or business community on a regular basis;
    6. include the services provided on a federal income tax schedule as an independent business;
    7. perform the services under the entity's name;
    8. obtain and pay for any required license or permit in the entity's name;
    9. furnish the tools and equipment necessary to provide the service;
    10. hire its own employees without contractor approval, pay the employees without reimbursement from the contractor and report the employees' income to the Internal Revenue Service;
    11. have the right to perform similar services for others on whatever basis and whenever it chooses; and
    12. the contractor does not represent the entity or the employees of the entity as its own employees to its customers.

Penalties

An employer that willfully violates the Fair Play Act by failing to properly classify its employees will be subject to civil penalties of up to a $2,500 fine per misclassified employee for a first violation and up to $5,000 per misclassified employee for a second violation within a five-year period.

Employers also may be subject to criminal prosecution (a misdemeanor) for violations of the act with a penalty of up to 30 days in jail, up to a $25,000 fine and debarment from bidding on or being awarded any Public Works contracts for up to one year for a first offense. Subsequent misdemeanor offenses would be punishable by up to 60 days in jail, up to a $50,000 fine and debarment from bidding on or being awarded any Public Works contracts for up to five years.

The term "willfully violates" means a contractor knew or should have known that his or her conduct violated the law. Workers' Compensation Law Judges will impose the civil penalties contained in the new law based on the evidence presented at the hearing.

Workers' Compensation Law Judges and the Bureau of Compliance may impose the penalties contained in the Fair Play Act. Penalties under the act are in addition to all existing civil and criminal penalties for misclassification, failure to provide required coverage or other violations of the Workers' Compensation Law, Labor Law or Tax & Finance Law.

Questions regarding this release may be addressed to the Bureau of Compliance, 20 Park Street, Room 202, Albany, New York 12207, [Effective June 29, 2012 all questions should be directed to Bureau of Compliance, 328 State Street, Schenectady NY 12305-2318] (866) 298-7830.

 

Robert E. Beloten
Chair