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February 12, 2008
NY Finds Thousands of Misclassified Workers

The New York Department of Labor says that a task force found more than 2,000 workers misclassified as independent contractors during a 4-month audit.

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In its first four months, the Joint Enforcement Task Force on Worker Misclassification discovered that more than 2,000 workers had been improperly treated as independent contractors rather than as employees. The state says the misclassification resulted in more than $19 million in unreported wages, $3 million in underpayments owed to workers, and more than $1.2 million in taxes and penalties owed to the Unemployment Insurance Trust Fund.

Governor Eliot Spitzer created the Joint Enforcement Task Force in September 2007 to address the problem of employers paying their workers off the books.

"I created this Task Force as a part of my economic security agenda to reduce long-standing abuses of workers and to level the playing field for law-abiding businesses," says Spitzer. "This report demonstrates why employee misclassification is a serious problem and why a coordinated approach is needed. I commend Commissioner Smith and the Task Force members for their hard work on behalf of New York workers."

Through December 2007, the Task Force conducted 15 joint enforcement sweeps primarily targeting construction and restaurant worksites, finding more than $19 million in unreported wages. Employers did not pay required federal, state, or local taxes on these wages, nor did they report such wages for unemployment or Social Security purposes, the states alleges. In addition, the Task Force found 646 workers who were owed minimum and overtime wages totaling approximately $3 million.

The Task Force also assessed more than $1.2 million in taxes and penalties owed to the Unemployment Insurance fund, which provides a critical safety net for workers who lose their jobs through no fault of their own. Asbestos, recordkeeping, and child labor violations were also uncovered.

The report makes proposals for improving enforcement in this area, including the establishment of a single statewide standard for determining whether an individual is an employee or independent contractor, and legislative changes that would facilitate greater sharing of data between the agencies.

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