The new Transportation Industry Fair Play Act, effective April 10, 2014, determines whether a driver of commercial vehicles is considered an employee for the company they are servicing or an independent contractor. The cost ramifications of this new law can be quite substantial for companies that hire out 3rd party truckers or transport folks to move their goods. The two biggest cost drivers here are taxes and workers compensation costs.
The state it appears is simply codifying through legislation what they have been trying to accomplish through the Department of Labor over the last several years which is to stop the use of “independent contractors” and try to make them employees. The state has figure out that many companies have been skirting taxes and workers comp premiums by classifying workers as “independent contractors” versus employees.
The construction industry just went through this, now it’s transportation. If you own a company that relies on third party vendors for the delivery of your goods and service the first action to take is to do the 11 point assessment as dictated by the State to see if your company is in compliance.
To take the 11 point Assessment – CLICK HERE
Hiring independent contractors for commercial goods transportation reduces a company’s liability and workers compensation costs. In the past, companies were not liable for the independent contractors that they hired for transportation. However, now Commercial good drivers that do not pass the 11-part test are considered employees rather than independent contractors. Furthermore, drivers classified as employees are entitled to workers compensation benefits from the company that hires them. Ultimately, the Fair Play Act will increase workers compensation premiums for companies that hire commercial good transportation services.
Employers might be tempted to misclassify commercial transportation services as separate legal entities to reduce additional workers compensation costs. However, if they knowingly misclassify commercial drivers as independent, New York workers compensation law judges will assess the following penalties:
- $2,500 fine per misclassified employee for the first violation and up to $5,000 per misclassified employee for a second violation within a five year period
- A Misdemeanor with a penalty of up to 30 days in jail, a $25,000 fine, and debarment from performing public work for up to one year for a first offense
- A second offense may be punishable with up to 60 days in jail, a $50,000 fine, and debarment from performing public work for up to five years
If you still have questions about the about how the NY Fair Play Transportation Act can increase costs substantially for your business, feel free to call a Risk Advisor @ (914) 357-8444.
