N.Y. Cracks Down On Employer Comp, Benefits Cheats

New York Gov. Eliot Spitzer has created a task force crackdown on an "epidemic" of employers who misclassify employees to avoid providing workers' compensation and other benefits by listing workers as private contractors or paying them off the books.

The governor's announcement of the executive order creating a Joint Enforcement Task Force was made Friday at a press conference with State Labor Commissioner Patricia Smith and labor leaders.

Mr. Spitzer's announcement noted that misclassified employees can be deprived not only of workers' compensation but unemployment insurance, Social Security, tax withholding, temporary disability insurance, minimum wage and overtime.

Businesses that follow the law and provide benefits are put at a competitive disadvantage, since they bear the expense, while operators who skirt the law avoid such costs, it was noted.

The executive order, which became effective immediately, allows for greater coordination among state agencies charged with classification enforcement and creates a new Joint Enforcement Task Force led by the Department of Labor.

Mr. Spitzer's statement said the task force will work to strengthen enforcement and avoid duplication of efforts by sharing relevant information, coordinating investigations and enforcement actions, and educating the business community and the public at large.

The task force will be required to issue a report to the governor on February 1 of each year, detailing its actions and suggesting potential legislative or regulatory changes in this area.

Mr. Spitzer said, "For too long state government has turned a blind eye on a growing epidemic that is keeping wages and benefits artificially low for working New Yorkers. This executive order--a key component of my economic security agenda--protects worker rights while leveling the playing field for law abiding employers so they are not at a competitive disadvantage to employers who refuse to play by the rules as they exploit hard working New Yorkers."

Commissioner Smith promised that the "task force is assembled and ready to reverse several years of lax enforcement."

New York State AFL-CIO President Denis Hughes said the order will "go a long way" toward eliminating opportunities for unscrupulous employers to deny workers "fair pay, benefits and protections under state law" and provide legitimate employers with a level playing field.

Also praising the governor's action were Change to Win Executive Director Greg Tarpinian and New York City Central Labor Council President Gary La Barbera.

According to the task force announcement, a Cornell University School of Industrial Labor Relations study estimated approximately 10 percent of workers reviewed from audits conducted by the Department of Labor were misclassified. In the construction industry, this number increased to 15 percent.

Members of the task force will include representatives from the Attorney General's Office, the Department of Taxation and Finance, the Workers' Compensation Board, the Workers' Compensation Inspector General and the New York City Comptroller's office. Each of these entities enforces different laws pertaining to misclassification of workers. Prior to the signing of the order, they did not coordinate their enforcement efforts on this issue.