Wednesday, February 13, 2008

Dozens of Companies Underpay or Misreport Workers, State Says


A new crackdown on employers in New York State that are paying workers off the books has snared dozens of companies and uncovered millions of dollars in violations, state officials said on Monday.

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.

“We think this not only is going well in terms of collecting money, but it’s having a real deterrent impact,” Ms. Smith said about the sweeps.

The sweeps grew out of a task force that Gov. Eliot Spitzer set up in September to crack down on companies that illegally classify employees as independent contractors, often to avoid paying unemployment insurance taxes and workers’ compensation premiums.

“I created this task force as a part of my economic security agenda to reduce longstanding abuses of workers and to level the playing field for law-abiding businesses,” Mr. Spitzer said in a statement on Monday.

Mr. Spitzer set up the task force after several labor leaders had complained that unionized trucking companies and construction contractors were being undercut by competitors that classified many of their employees as independent contractors.

“The misclassification of employees is not just a labor problem, it is an economic and human rights crisis,” said Gary La Barbera, president of the New York City Central Labor Council and president of Teamsters Local 282, which represents truck drivers for the construction industry.

Ms. Smith said the sweeps focused on the construction and restaurant industries and sought to ferret out off-the-books work as well as the misclassification of workers as independent contractors. State officials said that worker misclassification — from the failure to pay unemployment insurance taxes to failure to withhold income taxes — causes substantial revenue losses at various levels of government.

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.

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.

“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.

She said that a higher percentage of employers misclassified workers upstate than downstate, and a higher percentage of employees worked off the books downstate.

She said the state planned more sweeps that would look at not just the construction and restaurant industries, but also at car washes, janitorial firms and trucking companies.

In conjunction with Monday’s news conference, the task force released a 29-page report on employee misclassification. “These trends appear to be increasing over the past decade,” the report said, “with large numbers of employees misclassified and therefore unprotected by the most basic labor rights.”

The report called for a single statewide standard to determine whether a worker is an employee or independent contractor.

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