New York law makes it illegal to misclassify truckers

By David Tanner, Land Line associate editor | 3/19/2014

Employers who misclassify truckers in New York face civil and criminal penalties under a new law that takes effect April 10. Classification has ramifications not only for employee drivers but also for owner-operators and leased operators.

Formerly bill S5867, the law goes beyond standard Internal Revenue Service definitions of employee and independent contractor.

The law signed by Gov. Andrew Cuomo on Jan. 10 and amended on Monday, March 17, places the burden on an employer to properly classify those who transport goods in the state of New York.

It spells out the penalties for misclassification and contains a whistleblower provision to protect those who report misclassification by an employer.

The amendment, which OOIDA and the New York State Motor Truck Association supported, applies an 11-point business entity test to help determine who is and should remain an independent contractor.

Those who operate their own equipment to haul goods in exchange for compensation and receive an IRS Form 1099 for the work are independent contractors by definition.

Owner-operators leased to carriers can also apply the business entity test to see whether they are independent contractors or employees.

Kendra Hems, president of the New York State Motor Truck Association, says it is important to protect those who wish to remain independent contractors.

“We do feel the law protects independent contractors and their ability to operate in New York,” Hems told Land Line.

“There’s 11 points to that test. The 11 points are what we negotiated at the end of the last session. We do feel that independent contractors can meet all of the 11 points,” she said.

A study by Cornell University’s School of Industrial and Labor Relations found that nearly 40,000 employers misclassified more than 700,000 workers in New York state between 2002 and 2005.

Penalties for employers or contractors that violate the law are steep. A first offense carries a civil penalty of up to $2,500 per misclassified employee and up to 30 days in prison or up to $25,000 in criminal fines. A second or subsequent offense carries a $5,000 penalty per misclassified employee, up to 60 days imprisonment or up to a $50,000 criminal fine.

Graig Zappia, an attorney with Tully Rinckey PLLC, says one major change the legislation accomplishes is to place the burden on employers to classify those doing the work.

“The major change is turning it onto the company, the business, the employer to defend whether or not they have an employee or an independent contractor,” Zappia said. “The presumption to get over the initial hurdle is now borne by the employer as opposed to in the past, where the employee had to prove they are not an independent contractor.”

Zappia said provisions in the Labor Law are always fought on a case-by-case basis mainly because there are so many different types of businesses.

“There’s not a formula that you can come up with to make it uniform across the industry,” he said.

The new law attempts to use the business entity test in addition to IRS definitions to create some amount of certainty for those hauling goods.

Many truckers who work in and out of the nation’s ports do the work of employees but are classified as independent contractors. Zappia said the law aims to protect the rights of those drivers.

Classification issues are further complicated by pay structures and tax withholdings, and by trucking-specific issues like lease-purchase agreements, control of a person’s time or schedule, and detention time at the docks waiting for loads.

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