New York Businesses Who Employ Delivery Drivers Will See Changes Thanks To This New Law
February 4, 2014
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.