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Department of Labor announces new standards for classifying commercial truck drivers

ALBANY – A new standard for determining whether a commercial truck driver is an employee or an independent contractor, helping to further protect workers’ rights statewide was announced Wednesday by State Labor Commissioner Peter Rivera. The standards come as a result of the New York State Commercial Goods Transportation Industry Fair Play Act that Governor Cuomo signed into law on January 10, 2014. The law, which went into effect on April 10, 2014, also provides new penalties for employers who fail toproperly protect and classify their employees.

“The trucking industry is vital to how our state operates, from shipping materials that make our buildings, to parts and systems that keep us safe, to the food and products we use every day,” said Rivera. “For too long, truck drivers have sought to have a clear standard. This law provides clarity for employers and truckers.”

The state’s Joint Enforcement Task Force on Employee Misclassification (JETF) will enforce the law. The JETF, a partnership between the New York State Department of Labor, Workers’ Compensation Board and other agencies, investigates reports of fraud and conducts proactive enforcement sweeps. In 2013, the JETF identified nearly 24,000 instances of employee misclassification, discovered more than $333.4 million in unreported wages and assessed nearly $12.2 million in Unemployment Insurance contributions.

George Miranda, President, Teamsters Joint Council 16, said, “For too long, New York’s roads and highways were a race to the bottom for commercial drivers. Freight and delivery companies played fast and loose with their employees and got away with it. But no more. The Commercial Goods Transportation Industry Fair Play Act ensures that employee rights are protected. Thank you to Senator Savino and Assemblyman Wright for carrying this law through the legislature and to Governor Cuomo for getting it across the finish line. With the enforcement and education efforts announced today, we will ensure that this law marks a turning point for New York workers.”

Defining Who Is An Employee:

An employee treated incorrectly as an independent contractor is considered misclassified. Misclassification denies workers rightful benefits such as unemployment and workers’ compensation insurance, as well as wage standards and other rights. Misclassified employees can be denied a fair opportunity to form or join unions. Misclassification rates are disproportionately high in the trucking industry.

A legal independent contractor must be reported on a federal income tax form 1099. In addition, they must be defined as a separate business entity or they must be:

  1. Free from control and direction in performing the job, both under contract and in fact;
  2. Performing services outside of the usual course of business for the employer; and
  3. Engaged in an independently established trade, occupation or business that is similar to the service they perform.

A legal, separate business entity is a sole proprietor, partnership, corporation or other entity that meets 11 criteria under the new law. It must: 

  1. Be free from direction or control by the contractor over the means and manner of providing the service. The contractor may only specify the desired result of the work or provide direction required by federal rule or regulation;
  2. Not be subject to cancellation or destruction when its work with the contractor ends;
  3. Have invested substantial capital in its business entity beyond ordinary tools and equipment;
  4. Own or lease the capital goods, gain the profits and bear the losses of the business entity;
  5. Make its services available to the general public or others in the business community not a party to the business entity’s written contract on a continuing basis;
  6. If required by law, provide services reported on a federal income tax form 1099;
  7. Perform services for the contractor under a written contract and under the business entity’s name. The contract must state that the relationship between the contractor and the business entity is that of independent contractors or separate business entities;
  8. Obtain and pay for any required license or permit in the entity’s own name or, if allowed by law, pay for the use of the contractor’s license or permit;
  9. Hire its own employees without contractor approval and pay those employees without reimbursement from the contractor;
  10. Not represent the business entity or employees of the business entity as its own employees to the contractor’s customers; and
  11. Have the right to perform similar services for others on whatever basis and whenever it chooses.

Protecting Workers’ Rights:

Employers who violate the Commercial Goods Transportation Industry Fair Play Act will be subject to civil penalties of up to a $2,500 fine per misclassified employee for a first violation, and up to $5,000 per misclassified employee for additional violations within a five-year period.

For a first offense, an employer could also face a criminal penalty of up to 30 days in jail or up to a $25,000 fine and debarment from Public Works contracts for up to a year. Subsequent misdemeanor offenses are punishable by up to 60 days in jail or up to a $50,000 fine and debarment from performing Public Work for up to five years.

Employers, including corporate officers and certain shareholders, are also subject to penalties, taxes and restitution.

More information about the Commercial Goods Transportation Industry Fair Play Act is available online: