New Trend? States Expanding Employment Laws to Cover Independent Contractors

State legislative efforts to expand the coverage of new employment laws to independent contractors in addition to employees continue to emerge.  It appears that New York is on the cutting edge of this trend.  We highlight below an amendment to New York’s whistleblower law, which was signed into law on October 28, 2021.  It not only significantly broadens the scope of whistleblower protections in New York State but also enlarges the definition of protected “employees” to include independent contractors.

The bill just signed by Governor Kathy Hochul, Senate Bill S4394A, expanded what had been regarded as a rather limited whistleblower law that only protected disclosures of matters “in violation of law” that presented a “substantial danger to the public health or safety, or that which constitutes health care fraud.” Courts had interpreted the statute, codified at New York Labor Law section 740, as requiring workers to prove not only that the activity, policy or practice at issue satisfied the substantial danger requirement but also actually violated the law.

How does the amended whistleblower law expand upon prior New York law?

The new law expands whistleblower protection beyond public health and safety matters and now includes the disclosure, or threat to disclose, to a supervisor or governmental body, an “activity, policy or practice of the employer that the employee or independent contractor reasonably believes is in violation of [any] law, rule or regulation,” even if unrelated to public health and safety and without the requirement of proving that a law had been violated.  This amendment also adds to the list of prohibited retaliatory acts against former employees and independent contractors who have “blown the whistle,” such as blacklisting and threatening to contact federal immigration authorities about the worker or a member of his or her family or household.

Employees and independent contractors are not entitled to the protections of the law, however, if they do not make a good faith effort to first notify a supervisor of the company and afford the company an opportunity to correct the matter, unless one of five specified exceptions apply (including where there is an imminent and serious danger to public health or safety).

Finally, the new law, which will become effective 90 days after enactment, permits the recovery of punitive damages for acts of “malicious or wanton” retaliation, and requires employers to post notices informing workers about the expanded law in locations “customarily frequented by employees.”  There is no provision, though, indicating how a company should “post” a notice of this new law for independent contractors that do not have access to worksite locations where employee notices are commonly posted.

These expansions of New York’s whistleblower law brings the state into parity with many other states’ whistleblower laws, but New York has gone a step beyond by including independent contractors within the ambit of those persons who now are protected by the amended law.

Is this the first time New York has expanded employment laws to cover independent contractors?

No. The New York State Human Rights Law was amended in late 2019 to prohibit unlawful discrimination against independent contractors who provide services to an employer. This enactment is similar to an amendment of the municipal law in New York City. Both laws also require accommodations for religious beliefs and disabilities, and may form a basis for an exemption from the application of vaccination mandates imposed on independent contractors.

When New York State and New York City expanded sexual harassment protections for employees, they also added coverage of independent contractors protected by such anti-harassment laws. As we reported in a prior blog post, the New York City law also imposes requirements on companies with 15 or more employees and independent contractors to ensure that independent contractors who provide services to such companies 90 or more days per year receive anti-sexual harassment training.

These laws are in addition to New York City laws that have been enacted specifically to protect freelancers and other independent contractors.  We have previously written about the New York City’s Freelance Isn’t Free Law, which was enacted in May 2017.  That law regulated the relationship between independent contractors and those who retain them, giving independent contractors a right to sue for double damages if they are not provided with a written contract containing specified terms and are not paid in accord with those terms or within 30 days after completion of the contract services.

More recently, we were quoted in Law360 in an article about a set of six City Council bills, which Mayor Bill deBlasio said he that would sign, entitling independent contractors who deliver meals for restaurants through food delivery apps to an array of rights and protections regarding working conditions, tips, and wage payments.

What is the impact of these new legal initiatives on independent contractors and companies that utilize them?

Ironically, expanding the employee protections of these new laws to independent contractors may be a favorable circumstance for companies using independent contractors in New York.  If a worker treated as an independent contractor believes he or she has been discriminated against on the basis of a protected characteristic or retaliated against for engaging in a form of protected activity, the individual is no longer relegated to filing an independent contractor misclassification lawsuit in order to gain protections previously available only to employees. That aspect of these new provisions may actually reduce the number of such misclassification claims in New York.

Companies in New York should routinely include as attachments to their agreements with independent contractors operating in New York the state-issued notices about the new retaliation law and the state’s anti-discrimination and sexual harassment training laws. Hopefully, that will be deemed as satisfying the posting requirement in the new law.

What else should companies do when engaging independent contractors in New York and elsewhere?

Companies operating with independent contractors in New York and other states should still take steps to enhance their compliance with state and federal laws barring the misclassification of employees as independent contractors.

One process for doing so is IC Diagnostics (TM), which minimizes exposure to misclassification liability by restructuring, re-documenting, and/or re-implementing a company’s relationship with independent contractors in a customized and sustainable manner consistent with its current business model.

Written by Richard Reibstein, co-head of Locke Lord’s independent contractor misclassification and compliance practice and publisher of this blog.

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