New York cracks down on 1099 employee misclassification

From: Change To Win's Web Blog:

We told you back in September about a task force set up by New York Governor Eliot Spitzer to investigate "misclassification" -- the scam where employers weasel out of paying for their workers' health care and benefits by claiming them as "independent contractors", even though they work full time for their company -- in New York State.

Well, yesterday we saw the first results of that task force's work -- a crackdown on misclassifying companies that found millions of dollars in owed payments that New York employers had held back:

In 15 enforcement sweeps, state investigators found $19 million in wages that were not reported to the state and $3 million in underpayments to workers, the state’s labor commissioner, M. Patricia Smith, said at a news conference. Investigators also uncovered nearly $1 million in taxes that had not been paid to the state’s unemployment insurance fund...

In their sweeps, which investigated 117 companies, state officials found that 2,078 employees had been misclassified as independent contractors. The task force also found 646 workers who were owed minimum and overtime wages totaling about $3 million.

Commissioner Smith noted at the announcement that the corporate crooks they caught were just the tip of the iceberg:

“I wouldn’t doubt that 10 percent of the state’s workers are either misclassified as independent contractors or work off the books,” Ms. Smith said.

The task force also published a report on their findings to date -- unfortunately it doesn't seem to be posted on any of the various state government sites yet, but once I track down a copy I'll link it in from this post.

Posted by Jason Lefkowitz on February 12, 2008 at 11:02 AM |

Huge win, myself and the fellas at UnionReview have been covering this story for quite a while, you can see the links with a search at UR for Misclassification. The intra-agency communication in the misclassification task-force is a big part of it working. Looking forward to seeing this report.

According to the NY Times 2-12-08

Ms. Smith noted that soon after being visited by the task force, one employer began paying unemployment insurance taxes for 205 employees it previously had not reported.

The employers that were found in violation of various state labor laws will be required to pay back taxes, back wages and unpaid workers’ compensation premiums, with state officials often assessing additional penalties.

The sweeps were undertaken by the state’s Labor and Tax Departments, Workers’ Compensation Board and attorney general’s office, and the New York City comptroller’s office.