Task Force Recommends Clear, Consistent Standards

The Independent Contractor Issue

Volume XCIX, No. 8September, 1999

A task force appointed by Gov. George Pataki to study the independent contractor issue has concluded that workers “need certainty and clarity in their status” and that consistency “protects workers from abuse.” On July 6 the task force presented a set of recommendations, adopted unanimously, for addressing the administrative confusion which currently exists in New York State over whether specific workers should be classified as employees or as independent contractors.

The Task Force had been asked to: “(1) identify and recommend guidelines to provide clarity concerning the proper classification of workers; (2) propose recommendations to achieve uniform determination of independent contractor or employee status among the various State agencies; (3) ensure that any recommendations are designed to continue the protections afforded to legitimate employees; and (4) receive and evaluate information from labor unions, business groups and all other interested parties.”

Over a six-month period the task force held numerous meetings and conducted public hearings in Albany, New York City, Rochester and Buffalo. At those hearings, spokespersons for business and labor told of the difficulty caused by state agencies’ inconsistent, conflicting rulings on employee status. Workers – including Local 802’s Art Weiss – explained how denial of statutory benefits as the result of being misclassified as an independent contractor had led to hardships in their lives. The independent contractor issue has long been a priority for Local 802 and Unions for the Performing Arts, and musicians and other entertainment-industry workers testified in New York City, Rochester and Buffalo.

In its report, the task force concluded that establishing consistent standards “protects workers from abuse.” It also noted instances where the lack of “clear and consistent application of a standard . . . meant the loss of employment opportunities for both the contractor and its employees,” citing the testimony of upstate union leader Harold Joyce, who told of an electrical contractor who was underbid on a school district job by another company which paid its workers as independent contractors.

Task force recommendations to remedy this situation are summarized in the report as follows:

  1. Create a Commission on Independent Contractors – comprised of the Commissioner of Labor, who shall act as chair; the Commissioner of Taxation and Finance; and the Chair of the Workers’ Compensation Board – to approve industry-specific independent contractor guidelines and to oversee a process which would certify a worker or position as an employee or as an independent contractor. The commission would also be empowered to recommend statutory changes.
  2. Create a Labor/Management Council composed of representatives from business and labor, as well as one public member, to draft industry- or occupation-specific guidelines to be used in the classification of workers. The guidelines would then be subject to approval by the Commission on Independent Contractors. The guidelines, once approved, would be issued as regulations and would be binding upon all three State agencies.
  3. Create a Certification Board overseen by the Commission on Independent Contractors and composed of staff from State agencies (the Department of Labor, Department of Taxation and Finance, and Workers’ Compensation Board), to provide advisory opinions as well as formal certifications to business and workers that a relationship is either an employment relationship or an independent contractor relationship. Such certification would provide the parties with certainty as to the nature of the relationship and would provide a safe harbor from penalties. There would also be an appeal process for aggrieved parties to contest certifications issued by the board. In addition, the task force recommends the creation of an advisory committee to monitor the timeliness and accessibility of the certification process.

The most critical section of the report concerns the three factors that the task force recommends be used by “the Labor/Management Advisory Council and the Certification Board and all State agencies when rendering determinations with respect to worker classification.” It proposes that an independent contractor relationship be deemed to exist if all of the following conditions are met:

  1. The individual providing the labor or services has the right to control the means and manner of providing the labor or services;
  2. The individual has the meaningful right to offer substantially similar labor or services to others;
  3. The individual is subject to an entrepreneurial risk and in that role is responsible for the satisfactory completion of the labor or services that are contracted to be performed, with failure to complete the labor or services potentially giving rise to an action for breach of contract. In addition, his/her overall business activities have or may have the potential to earn a profit or bear risk of loss, as those terms are commonly understood and to the extent that profit or loss is discernible, beyond the risk of not being paid, with the potential for profit or loss depending on the individual’s efforts and decisions and not being limited to the amount of time worked or the amount of work performed on any one project.

The report also recommends that all agencies be bound by these factors – except for the Department of Tax and Finance, which would conform with IRS rulings in those few situations where IRS rulings differ from State Agency findings.

Local 802 President Bill Moriarity, a task force member, said, “We believe that these procedures would, over a period of time, clear up the bureaucratic confusion that presently exists and that creates so much frustration for everyone. I think the three factors for determining independent contractor status are practical and fair,” he said. “The task force worked collegially to reconcile all the various members’ positions and I feel we succeeded.”

The report comes with the unanimous recommendation of the task force, which was chaired by James McGowan, Commissioner of Labor. Other representatives of New York State were David S. Bradley, Acting Director of the Governor’s Office of Regulatory Reform; H. Neal Conolly, Executive Director of the State Insurance Fund; Robert S. Snashall, Chair of the Workers’ Compensation Board; and Michael Urbach, Commissioner of Taxation and Finance.

The business community was represented by Dale Skivington from Eastman Kodak; Gary Olsen, representing General Building Contractors; Michelle Stafford, representing the National Federation of Independent Business; and Diana Gianokos from the Business Council. Labor’s representatives, in addition to Moriarity, were Paul Cole, Secretary-Treasurer of the New York State AFL-CIO, who led the labor contingent, and James Conigliaro, Vice-President of the NYS AFL-CIO from District 15, International Association of Machinists.