Independent Contractors in New York
Issue Overview: Many companies are hiring independent contractors for functions that in the past may have been performed by employees. This results in savings, since businesses are not responsible for withholding payroll taxes or paying employee benefit costs for independent contractors. Independent contractors are also excluded from coverage under unemployment insurance laws, withholding requirements, and overtime and minimum wage requirements, and they do not have to carry workers' compensation insurance. However, there is currently no legal definition of what constitutes an independent contractor. The IRS has developed a 20-step test based on case law to determine independent contractor status, but the test is subjective and not easy to pass.
Creating a simple, clear definition for "independent contractors" argue would provide much needed clarification. Business owners would have confidence that they will not be fined for incorrectly treating a worker as such.
NFIB Position: We support clarifying the rules in a way that is fair and easily understandable so that small business owners can have confidence that they are not misclassifying employees, but which also allows them to appropriately use independent contractors. Sixty-four percent of NFIB/New York members voiced support for such a measure in our most recent Member Ballot.
Issue Status: Former Gov. Eliot Spitzer has created a task force under the Department of Labor focused on the issue of independent contractors and employee misclassification. However, their focus has been adversarial in tone, focused on enforcement rather than reforming a system that is unclear at best -- and in some cases arguing that individuals who by most reasonable standards would be regarded as independent contractors must be classified as employees. We will continue to make the case that a clear and universally understood definition of "independent contractor," with objective, reasonable and easily understood criteria, is needed.
