February 11, 2008
STATE FINDS MILLIONS IN UNREPORTED WAGES AND UNDERPAYMENTS TO WORKERS DUE TO ILLEGAL LABOR PRACTICES
The Department of Labor today announced the initial findings of the Joint Enforcement Task Force on Worker Misclassification. In its first four months, the Task Force discovered that more than 2,000 workers had been misclassified: a situation where employers improperly treat their workers as independent contractors rather than as employees, costing the state millions of dollars. Worker misclassification translates into a substantial revenue loss at all levels of government for vital programs and services, which leaves taxpayers the burden of making up the difference.
Governor Eliot Spitzer created the Joint Enforcement Task Force in September 2007 to address the problem of employers paying their workers off the books. Such employers hope to avoid taxes and other legal obligations such as workers’ compensation coverage and overtime pay. This 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. The Governor’s order directed the Task Force to report on its findings each February and make recommendations for ways to address the problems it encountered. Commissioner M. Patricia Smith announced the Task Force’s first report in New York City today, where she was joined by members of the Task Force and labor representatives.
“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,” said Governor 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.”
State Department of Labor Commissioner M. Patricia Smith said: “These striking results, in only four months, reveal the extent of a problem that has been ignored for many years. Employers who misclassify their workers are violating the state’s laws and cheating their workers out of required pay, benefits and protections.”
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. 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.
New York State AFL-CIO President Denis Hughes said: “The New York State AFL-CIO applauds Governor Spitzer and Commissioner Smith for their dedication and commitment to this most important issue. The proposals contained in this report will go a long way toward protecting the rights, dignity and well-being of working men and women throughout this state.”
New York City Central Labor Council President Gary La Barbera said: “It is clear the Governor’s Task Force on Employee Misclassification is hard at work, and we are proud to be part of this diligent and resilient effort. The misclassification of employees is not just a labor problem; it is an economic and human rights crisis. The New York City Central Labor Council continues to make combating the misclassification crisis one of our top priorities, and will continue to work with the Governor's Office and the Department of Labor to develop aggressive education campaigns to let workers know their rights so they can protect themselves.”
Change to Win Executive Director Greg Tarpinian said: “Misclassification cheats workers out of the chance to achieve the American Dream by stripping them of important benefits and legal protections. It cheats responsible and legitimate employers through unfair competition, and it cheats the state out of millions of dollars in revenues. Change to Win applauds the Governor for continuing to take bold action on this vital issue and for his commitment to protecting the workers of New York and seeing that all employers live up to the laws to compete fairly.”
UFCW Local 1500 President Bruce W. Both said: “On behalf of the 22,000 members of United Food and Commercial Workers Union Local 1500, I want applaud the quick and hard work done by this Task Force. I also want to thank Governor Spitzer and Commissioner Smith for once again proving that this administration not only talks the talk but walks the walk when it comes to helping working families throughout New York State.”
The creation of the Task Force enables agencies to share data and to coordinate enforcement efforts aimed at eliminating employee misclassification. Task Force “sweeps” have often involved dozens of inspectors from several agencies investigating the same employer or worksite.
Members of the Task Force include representatives from the New York State Department of Labor; the New York State Department of Taxation and Finance; the New York City Comptroller’s Office; the New York State Office of the Attorney General; the Workers’ Compensation Board; and the Workers’ Compensation Fraud Inspector General.