New York State Senate Bill S1514 Raises Specter of Stop-Work Orders for Employee Misclassification

Quick Hits

• Stop-Work Orders for Misclassification: New York Senate Bill S1514 would allow the commissioner of labor to issue stop-work orders if an employer is found to have knowingly misclassified employees or provided false information to insurance companies.
• Notification and Compliance: Employers would receive written notice of the intention to issue a stop-work order and have seventy-two hours to address the violations before the order is enforced.
• Employee Rights and Penalties: Employees affected by stop-work orders would be entitled to their regular pay for up to ten days, and employers face significant penalties for noncompliance.

Issuance of Stop-Work Orders

S1514 stipulates that if the commissioner of labor determines, after an investigation, that an employer has knowingly misclassified employees as independent contractors or provided false information to insurance companies, the commissioner will notify the employer in writing of the intention to issue a stop-work order. The notice must include:

• the manner of service consistent with section 308 of the civil practice law and rules;
• notification of the employer’s right to a hearing;
• a seventy-two-hour period for the employer to address the violations before the stop-work order is issued; and
• the factual basis for the decision and instructions for compliance.

Enforcement and Compliance

If the employer fails to comply within the seventy-two-hour period, the commissioner would be authorized to issue a stop-work order requiring the cessation of all business operations at the site of the violation. The order would take effect upon service and remain in effect until the employer complies and pays any assessed penalties. Employers would have the right to contest the order within ten days of issuance.

Penalties and Employee Rights

Noncompliance with a stop-work order would result in penalties ranging from $1,000 to $5,000 per day. Employees affected by the order would be entitled to their regular pay for the duration of the order or up to ten days, whichever is less. The bill also includes provisions to prevent retaliation against employees who initiate complaints.

Challenges for Employers

The bill does not clearly define the criteria for determining whether misclassification was intentional. This ambiguity could lead to disputes and challenges in enforcement, as employers may argue that any alleged misclassification was unintentional.

The seventy-two-hour compliance window may be insufficient for employers to address complex misclassification issues, especially if they need to reclassify numerous workers or make significant changes to their business practices. This tight timeframe could result in rushed decisions and further complications.

Stop-work orders can cause significant business disruptions and financial losses. Employers may face operational shutdowns, loss of revenue, and additional costs associated with compliance and penalties. The impact on employees, who may face uncertainty and loss of income, also needs to be considered.

Conclusion

Senate Bill S1514 passed the Senate in a previous legislative session but died in the Labor Committee. However, its reintroduction and potential for significant consequences means that employers should closely monitor the bill’s progress. Employers may also want to review their current independent contractor relationships to ensure compliance and to be prepared for potential investigations if the bill becomes law.

Ogletree Deakins’ Buffalo and New York offices will continue to monitor developments and will provide updates on the New York and Wage and Hour blogs as additional information becomes available.

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