Scarinci Hollenbeck, LLC, LLCScarinci Hollenbeck, LLC, LLC

Firm Insights

New York Businesses Who Employ Delivery Drivers Will See Changes Thanks To This New Law

Author: Scarinci Hollenbeck, LLC

Date: February 4, 2014

Key Contacts

Back

Like other states, New York has brought legislative focus to bear on what is regarded as widespread abuse of independent contractor status in the trucking industry.

New York Gov. Andrew Cuomo recently signed a new law, effective March 1, 2014, that will punish businesses in the transportation and delivery industries that misclassify workers who deliver commercial goods as being independent contractors.

The New York Commercial Goods Transportation Industry Fair Play Act applies to all “commercial goods transportation contractors,” which are defined as New York sole proprietorships, partnership, corporations, or other business entities that compensate commercial drivers who have a commercial driver’s license to transport goods in New York State.

The new law creates a presumption that any person operating a commercial motor vehicle with a gross vehicle weight rating (GVWR) of more than 10,000 pounds performing transportation services of commercial goods for a commercial goods transportation contractor is an employee and not an independent contractor unless one of two tests is satisfied. The first test determines whether the worker is an independent contractor while the second determines whether the worker qualifies as a separate business entity.

The Independent Contractor Test (this is the tough “ABC” test already found in more than 10 states): requires that all of the following three factors must be satisfied:

  • The individual is free from control and direction in performing the job, both under his or her contract and in fact;
  • The service must be performed outside of usual course of business for which the service is performed; and
  • The individual is customarily engaged in an independently established trade, occupation, profession, or business that is similar to the business at issue.

The Separate Business Entity Test: is an even more stringent test that requires that all of the following 11 factors to be satisfied:

  • The business entity is performing the services free from the direction or control over the means and manner of providing the service, subject only to the right of the commercial goods transportation contractor to specify the desired result;
  • The business entity is not subject to cancellation or dissolution upon severance of the relationship;
  • The business entity has a substantial investment of capital in the business entity, including but not limited to ordinary tools and equipment;
  • The business entity owns or leases the capital goods and gains the profits and bears the losses of the business entity;
  • The business entity has an option to make its services available to the general public or the business community on a continuing basis;
  • The business entity includes services rendered on a Federal Income Tax Schedule as an independent business or profession;
  • The business entity performs the services pursuant to a written contract, under the business entity’s name, specifying their relationship to be as independent contractors or separate business entities;
  • When the services being provided require a license or permit, the business entity pays for the license or permit in the business entity’s name or, where permitted by law, pays for reasonable use of the commercial goods transportation contractor’s license or permit;
  • If necessary, the business entity hires its own employees, subject to applicable qualification requirements or federal or state laws, rules or regulations, pays the employees without reimbursement from the commercial good transportation contractor and reports the employees’ income to the Internal Revenue Service;
  • The commercial goods transportation contractor does not require that the business entity be represented as an employee of the commercial goods transportation contractor to its customers; and
  • The business entity has the right to perform similar services for others on whatever basis and whenever it chooses.

Penalties for Violating the New Law

Any New York business violating the law may be subject to civil penalties of up to $1,500 for a first violation and up to $5,000 for a subsequent violation within a five-year period. Willful violations (when the company knew or should have known that it was committing a violation) can result in monetary fines of up to $2,500 per worker for the first violation and up to $5,000 per worker for subsequent violations within a five-year period.

The law also adds potential criminal liability for those who are found to have willfully violated the law.  A first offense is punishable as a misdemeanor and may include imprisonment of up to 30 days or a fine of up to $25,000. Any subsequent offense exposes the employer to up to 60 days’ imprisonment and a fine not to exceed $50,000.

Where the commercial goods transportation contractor is a corporation, each shareholder owning 10 percent or more of the company and each officer “who knowingly permits the corporation to willfully violate” the new law shall be personally liable for the civil and criminal penalties upon conviction.  In addition, controlled group liability will be imposed upon any “substantially owned affiliated entity.”

The Message for Employers

New York has adopted a tough approach to worker misclassification in the trucking industry. To avoid costly compliance failures, trucking businesses that employ “independent contractors” should work closely with experienced counsel to determine if such workers need to be reclassified in light of the new, more stringent requirements.

No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.

Scarinci Hollenbeck, LLC, LLC

Related Posts

See all
Corporate Transactions: Best Practices for Successful Deals post image

Corporate Transactions: Best Practices for Successful Deals

Corporate transactions can have significant implications for a corporation and its stakeholders. For deals to be successful, companies must act strategically to maximize value and minimize risk. It is also important to fully understand the legal and financial ramifications of corporate transactions, both in the near and long term. Understanding Corporate Transactions The term “corporate […]

Author: Dan Brecher

Link to post with title - "Corporate Transactions: Best Practices for Successful Deals"
How to Conduct a Fair and Legal Employee Termination in 2025 post image

How to Conduct a Fair and Legal Employee Termination in 2025

Ongoing economic uncertainty is forcing many companies to make tough decisions, which includes lowering staff levels. The legal landscape on both the state and federal level also continues to evolve, especially with significant changes to the priorities of the Equal Employment Opportunity Commission (“EEOC”) under the Trump Administration. Terminating an employee is one of the […]

Author: Angela A. Turiano

Link to post with title - "How to Conduct a Fair and Legal Employee Termination in 2025"
Admin Dissolution for Annual Report: What You Need to Know post image

Admin Dissolution for Annual Report: What You Need to Know

While filing annual reports may seem like a nuisance, failing to do so can have significant ramifications. These include fines, reputational harm, and interruption of your business operations. In basic terms, “admin dissolution for annual report” means that a company is dissolved by the government. This happens because it failed to submit its annual report […]

Author: Dan Brecher

Link to post with title - "Admin Dissolution for Annual Report: What You Need to Know"
What Is Antitrust Litigation Law? post image

What Is Antitrust Litigation Law?

Antitrust laws are designed to ensure that businesses compete fairly. There are three federal antitrust laws that businesses must navigate. These include the Sherman Act, the Federal Trade Commission Act, and the Clayton Act. States also have their own antitrust regimes. These may vary from federal regulations. Understanding antitrust litigation helps businesses navigate these complex […]

Author: Robert E. Levy

Link to post with title - "What Is Antitrust Litigation Law?"
Dissolving Your Business: Essential Legal Steps to Protect Your Interests post image

Dissolving Your Business: Essential Legal Steps to Protect Your Interests

If you’re considering closing your business, it’s crucial to understand that simply shutting your doors does not end your legal obligations. Unless you formally dissolve your business, it continues to exist in the eyes of the law—leaving you exposed to ongoing liabilities such as taxes, compliance violations, and potential lawsuits. Dissolving a business can seem […]

Author: Christopher D. Warren

Link to post with title - "Dissolving Your Business: Essential Legal Steps to Protect Your Interests"
The Role of Corporate Restructuring in Mergers & Acquisitions post image

The Role of Corporate Restructuring in Mergers & Acquisitions

Contrary to what many people think, corporate restructuring isn’t all doom and gloom. Revamping a company’s organizational structure, corporate hierarchy, or operations procedures can help keep your business competitive. This is particularly true during challenging times. Corporate restructuring plays a critical role in modern business strategy. It helps companies adapt quickly to market changes. Following […]

Author: Dan Brecher

Link to post with title - "The Role of Corporate Restructuring in Mergers & Acquisitions"

No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.

Sign up to get the latest from our attorneys!

Explore What Matters Most to You.

Consider subscribing to our Firm Insights mailing list by clicking the button below so you can keep up to date with the firm`s latest articles covering various legal topics.

Stay informed and inspired with the latest updates, insights, and events from Scarinci Hollenbeck. Our resource library provides valuable content across a range of categories to keep you connected and ahead of the curve.

Let`s get in touch!

* The use of the Internet or this form for communication with the firm or any individual member of the firm does not establish an attorney-client relationship. Confidential or time-sensitive information should not be sent through this form. By providing a telephone number and submitting this form you are consenting to be contacted by SMS text message. Message & data rates may apply. You can reply STOP to opt-out of further messaging.

Sign up to get the latest from the Scarinci Hollenbeck, LLC attorneys!