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N.Y. Fines Businesses $4 Million for Misclassified Hourly Workers

New York state Labor Commission officials said Monday, February 11, that they have fined businesses more than $4 million for illegally classifying workers as independent contractors, but that they had only scratched the surface of an extensive problem.

February 12, 2008
New York state Labor Commission officials said Monday, February 11, that they have fined businesses more than $4 million for illegally classifying workers as independent contractors, but that they had only scratched the surface of an extensive problem.

State Labor Commissioner M. Patricia Smith said a task force she chaired found more than 2,000 violations at 17 companies in the four months since Gov. Eliot Spitzer created the force. Smith noted that the work requires coordination among five agencies at the state and local level, slowing progress.

By counting employees as independent contractors, rather than full-time workers, employers avoid paying unemployment insurance, overtime, workers’ compensation insurance and other benefits.

The businesses targeted are expected to pay $1.4 million in unemployment insurance and $3 million for unpaid wages owed to workers.

Ed Ott, executive director of the New York City Central Labor Council and a longtime advocate for a crackdown on independent contractors, said the action will benefit most businesses.

“Misclassification is unfair to workers, unfair to employers who obey the law,” Ott said.

The governor’s action followed a study released last year by Cornell University professor Fred B. Kotler that estimated 700,000 workers are misclassified statewide.

Filed by Matthew Sollars of Crain’s New York Business, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.