How a New York Employment Lawyer Can Help with Independent Contractor Classification

 It’s becoming increasingly common for New Yorkers to earn their living through self-directed, freelance, or contractual work. This type of work is now known as the gig economy. These arrangements can come with many benefits, including the freedom to set your own hours and pick and choose projects. 

But although this type of work is increasingly popular, many workers who earn their living this way don’t understand the full extent of their rights or their employers’ legal obligations.

Many companies will hire workers as independent contractors, but then set performance expectations and work parameters that are much more in line with that of a full-time employee.

Employers often do this to avoid paying workers the benefits and level of compensation normally given to full employees. Not only is cutting costs by intentionally misclassifying independent contractors illegal, it also deprives workers of the rightful protections and pay they deserve for this level of work.

 What Is the Difference Between An Independent Contractor And An Employee In New York?

Put simply, independent contractors are workers who are in business for themselves, serving clients or customers rather than a single company or employer.

Generally, independent contractors have more flexibility in their working conditions. They’ll often serve a variety of clients, set their own working hours, and are able to work under conditions relatively free of direct supervision from their clients.

Individuals working as independent contractors also may:

• Have an established business

• Advertise for clients in electronic or print media

• Keep their own place of business

• Provide services using their own equipment, tools, and supplies

• Set or negotiate their own pay rate

• Refuse work offers

• Hire help or subcontractors

• Work for more than one company at a time

• Earn a profit or suffer a loss as a result of their work 

Under Federal and New York law, no single factor in a working relationship definitively makes someone an employee. Instead, courts have said that employee status is determined by considering various factors in the employer-worker relationship. 

Ultimately, whether or not someone is an employee depends on how much supervision, direction, and control an employer has over their work.

The more control that an employer has over the circumstances of a worker’s day-to-day labor, the more likely that they’re in an employer–employee relationship, not an employer–independent contractor one.

Someone is likely an employee if their employer habitually does any number of the following things:

• Chooses when, where, and how they perform their services

• Provides facilities, equipment, tools, and supplies

• Directly supervises the services

• Sets the hours of work

• Sets the rate of pay

• Requires exclusive services (i.e. that you can’t work for competitors)

• Requires attendance at meetings and/or training sessions

• Asks for oral or written reports

• Reserves the right to review and approve the work product

• Requires prior permission for absences

How you are paid can also be an indicator of employment status. Employees are usually paid by hourly rate or salary, while independent contractors are generally paid by the project or task.

I have been litigating the issue of whether a worker is an employee or an independent contractor for over 25 years. While I have literally handled thousands of cases, there are three that I always like to point out because they are reported decisions by two different appellate courts in New York.

The three cases I point out are as follows:

1.     Barak v. Chen

a.     This case can be viewed here: https://casetext.com/case/barak-v-chen-3

2.     Chaouni v. Ali

a.     This case can be viewed here: https://casetext.com/case/chaouni-v-ali

3.     Castro-Quesada v. Tuapanta

a.     This case can be viewed here https://casetext.com/case/castro-quesada-v-tuapanta-2

I am proud of my work on these cases for several reasons. First, it shows that the legal system can and does work. In all three cases, the lower court denied my motion for summary judgment. I then appealed to the Appellate Court in New York and convinced a panel of judges that my position was correct. In all three cases, the court reversed the lower court's decision and directed that summary judgment be granted and the cases were dismissed.

This is important because it means that just because one judge did not rule in your favor does not mean you have no legal recourse. An appeal can be costly and time-consuming, but it is an essential tool to protect your legal rights.

Next, not only did these courtroom victories make my clients happy, but these cases helped to shape the law in the State of New York on the issue of when one is and is not an employee.

Is Insolvency for American Transit Inevitable?

Insurance is meant to protect you when unexpected events happen, but what happens if your insurance company runs out of money or goes out of business?  Although the insurance industry is highly regulated, insurance companies fail for various reasons. For example, they might underprice their products or have higher-than-expected insurance claims or possibly both.

It is the job of the New York State Department of Financial Services (“DFS”) to oversee insurance companies' financial stability. A company’s financial stability helps to assure the consumer that the company will be there to pay claims in the future.

There have been reports that American Transit Insurance Co (“ATIC”), the biggest insurer of for-hire vehicles in New York City, is insolvent and is at risk of a meltdown. The effects of what would happen if ATIC was declared insolvent are beyond the scope of this article, but some things must be stated now so the entire industry is aware. While ATIC may be the prime example of financial instability, the underlying facts reveal the failure of DFS to take action when it knew ATIC was in financial trouble going back to the 1980s

Here is a historical perspective. In 2021, Huggins Actuarial Services issued an actuarial report stating that while ATIC had a $190 million provision for unpaid losses, the loss-adjustment expenses made by ATIC were $508.8 million less than the $698 million it considered the minimum necessary. The report concluded that the ATIC reserves provisions do not meet the requirements of New York state law and are not consistent with reserves computed under accepted actuarial standards.

At the time, the CFO of ATIC said the company did not accept the actuary's projection because of the "unique nature" of the New York City commercial auto industry, the impact of "underwriting and claims fraud investigation and defense initiatives", and how pandemic-related closures hit New York City transportation. Now, fast-forward to 2024.

In a letter dated April 3, 2024, the DFS Chief Compliance and Risk Officer wrote a letter to ATIC stating that ATIC’s consulting agency agreed that ATIC’s monetary reserves are massively deficient. The statement of actuarial opinion filed with ATIC’s December 31, 2023, annual statement indicated that ATICs should have reserves of approximately $878 million. Instead, the company has reported reserves of only $187 million, resulting in a reserve deficiency of more than $691 million. Since ATIC reported a surplus of approximately $26 million, this resulted in an insolvency of approximately $665 million. In the same letter, DFS stated that New Yorkers are counting on ATIC to pay claims for personal injury, property damage, and medical expenses. The DFS letter noted that despite having collected premiums for drivers for years, ATIC does not have the assets to pay these claims.

In fact, the April 2024 DFS letter notes that there has been an ongoing deterioration of ATIC's financial condition, which was first identified as inadequate in 1979, and that insolvency has continued to increase since then. Notably, as of December 31, 1986, DFS concluded that ATIC was insolvent by $6.2 million. By the end of 1989, DFS found that ATIC was insolvent by $39.9 million. A report on examination by DFS as of December 31, 1997, which was prepared by an independent accounting firm, concluded that ATIC was insolvent by $79.3 million. DFS noted that it found as of December 31, 2007, ATIC was insolvent by $139.8 million, and by the end of 2013, the insolvency had increased to $254.4 million dollars.

DFS claims that over the years, it has repeatedly sought to engage ATIC to get the company to address its financial condition. For decades, the company has failed to address the issues identified by DFS. The result of those failures is the continued deterioration of ATIC. The shortfall of $665 million is substantial and represents an unsustainable trajectory that must be corrected by direct concrete action.

ATIC submitted a remediation plan on February 26, 2024, but DFS said it falls far short of the drastic action needed to restore ATIC to a sustainable financial condition. DFS noted that the plan lacks any substantive detail on how ATIC plans to cure the existing insolvency. DFS noted that if ATIC cannot attract capital, it will be unable to survive. DFS reserved the right to take any action it deems necessary to protect ATIC's insureds and the broader insurance market.

When necessary, DFS will work with an insurer to take all reasonably feasible actions to rehabilitate its financial situation, including supervision of the reinsurance or sale of one or more blocks of business.

As previously stated, when an insurance company has financial difficulty, the DFS Superintendent may seek an order from the New York State Supreme Court allowing the Superintendent to take over its operations if certain circumstances exist that affect its financial stability. DFS has known of ATIC's deteriorating financial condition not for several years but for several decades. Yet, it has done nothing to protect FHV drivers and those who have outstanding claims due to motor vehicle accidents.

So how did we get here? ATIC has always been known to be the cheapest in the FHV insurance market. But as most people know, sometimes you get what you pay for. I can't speak for the backroom politics of what goes on in the minds of ATIC's management. What bothers me the most is that DFS is a New York State agency that has wholly and utterly failed in its mission to protect the insureds who pay for this auto coverage. This is beyond unacceptable.

FHV drivers in New York City (“NYC”) need to know if DFS will seek to rehabilitate ATIC or if it will take it over and liquidate its assets. If such an event occurs, and ATIC goes out of business and can’t pay its claims, the NY State Guarantee Fund will step in to cover claims up to certain limits. The guaranty fund is supported by insurance companies that are licensed to operate in New York State. These companies contribute to the fund, ensuring that there’s money available if one of them fails. When an insurance company becomes insolvent, the fund covers the payment of claims and refunds any unearned premium.

The real question is what will happen if ATIC is taken over by DFS and liquidated. What will roughly 60% of all for-hire vehicle owners/operators currently insured by ATIC do to obtain insurance? Some may be able to obtain insurance from Hereford Insurance Company, the second-largest insurer of FHVs in NYC. 

The reality is that if ATIC fails, some FHV owners/operators will not be able to procure the required insurance. Few insurance companies are in the NYC FHV market, which is a specialized niche market. Big brand-name insurance companies such as GEICO, State Farm, Allstate, and Progressive do not write policies for commercial FHV insurance in NYC.

This is because most insurance companies have more rigorous underwriting standards, and rightly so. Insurance underwriting standards are crucial to balancing risk and profitability. When a company has low underwriting standards, it approves policies that don’t meet robust criteria, leading to higher claim frequencies and severities and impacting profitability.

If ATIC fails, some FHV owners/operators will not be able to afford FHV insurance or will be unable to procure a new FHV policy elsewhere. Thus, causing a massive shortfall in the supply of FHVs. FHV bases will have fewer drivers to dispatch to. The riding public will have to wait longer for their FHV to arrive, and some will be left stranded. While no one knows what will happen, I think the FHV industry is in for another major disruption. You better put your seatbelts on.

By: Steven J. Shanker, Esq.

Uber Sues City of New York- Again

The New York City Department of Consumer and Worker Protection (“DCWP”)- formerly the Department of Consumer Affairs (DCA)— was created to protect and enhance the daily economic lives of New Yorkers to create thriving communities. DCWP licenses more than 45,000 businesses in more than 40 industries and enforces key consumer protection, licensing, and workplace laws that apply to countless more.

In September 2021, the New York City Council (the “City Council”) signed into law a package of legislation directed at food delivery platforms. Among the relevant measures was Local Law 115, which required DCWP to study the pay and working conditions of food delivery workers and, based on the results of its study, to establish a method for determining the minimum payments that third-party food delivery services and third-party courier services (together, “apps”) must pay to food delivery workers. The rule is complicated, and the basis for the rule relies upon limited studies and data. Suffice it to say that the pay basis is somewhat similar to the rules that the High Volume For-Hire Services (“HVFHS”).

On June 12, 2023, DCWP issued a Final Rule setting a minimum pay rate for app-based restaurant delivery workers. The rule was scheduled to go into effect on July 12, 2023. On June 7, 2023, Uber Technologies, Inc. (“Uber”) filed an order to show cause in the New York County Supreme Court seeking a temporary restraining order (“TRO”) to enjoin the DCWP from enforcing the new pay rule. Of course, the City of New York opposed Uber’s application for a TRO. On July 7, 2023, New York County Supreme Court Justice Nicholas W. Moyne issued the TRO enjoining the CDWP from enforcing the new rule pending a hearing on Uber’s application for a preliminary injunction that is now set for oral arguments on July 31, 2023.

• A copy of the Temporary Restraining Order can be found HERE.

• A copy of the Affirmation of Urgency can e found HERE.

• A copy of the Article 78 Petition initiating the lawsuit can be found HERE.

• A copy of the Memo of Law in Support can be found HERE.

• A copy of the City’s Opposition can be found HERE.

Transportation Litigation, Mitigation and Defense & Rapid Response

What does Transportation defense mean? It means The Shanker Law firm, P.C. has extensive experience representing a wide variety of matters concerning, transportation network companies, trucking companies, car rental companies, commercial lines, ride sharing and technology companies, fleets, and other transportation organizations. We represent commercial transport companies and possess an in-depth understanding of the transportation industry. We use this knowledge to provide clients with a comprehensive defense to reduce or eliminate liability on their behalf, including elements such as safety measures, training programs, vehicle inspections, and government compliance protocols. We appreciate the effect claims, accidents, and litigation may have on our client’s businesses. We have years of experience investigating, evaluating, and trying transportation litigation cases. We understand the importance of performing a thorough investigation and providing our clients with a strategy for representation as quickly as possible while keeping them informed throughout each stage of their defense. We have collectively tried and arbitrated hundreds of claims arising from transportation accidents. We utilize aggressive defense with creative and forward-thinking strategies help clients resolve disputes in a cost-effective manner.

What is Rapid Response? Rapid response and full-service representation are the hallmarks of our transportation defense practice. When a commercial motor vehicle accident occurs, we must begin our own investigation as quickly as possible. This helps us maximize our client’s advantage as we begin to build evidence to mitigate damage and limit liability. Because we have extensive knowledge of Federal Motor Carrier Safety Administration (FMCSA) and Department of Transportation (DOT) regulations, and experience in defense negotiation and litigation, we are able to provide full-service representation through every phase of our client’s case. Recognizing the importance of immediate action, we provide a prompt response when you call. Working with experts, accident investigators and re-constructionists who will be on the scene right away, we ensure that all evidence remains intact, witness information is gathered and the cause of an accident is accurately assessed.

The next time you need defense counsel to represent your interests, consider whether they have extensive experience in the transportation industry in addition to simple insurance defense cases. There is a vast difference.

TECHNOLOGY AND FHV INSURANCE

Dashcams and other telematics devices are often used to enable for-hire vehicle fleets to improve their safety operations and obtain better insurance coverage and prices. These technological and integrations are not new, but insurance companies tend to look to insurance companies that have safety as the pillar of their fleet. 

Small and midsize fleets often lack the resources necessary to impact safety in the same ways as some of the more successful fleets. A for-hire vehicle and/or transportation entity need safety and risk-management tools as well as end-to-end solutions. These can be obtained, but one thing that is lacking in New York City is the ability to obtain a one-on-one relationship with a dedicated fleet services representative with an insurer.

Fleets desire to improve safety and want to work with insurance companies to form a relationship with their loss control representative but underwriters still seem to care more about how safe you have been over the past three years and less about how much you’re willing to invest in safety going forward. Insurance companies can deliver more tailored and effective products and services by leveraging real-time data. Data also is what powers services and tools fleets can use to achieve insurance cost savings.

Risk management typically begins with high-quality telematics—including interior and road-facing dashcams. However, great telematics are not enough to protect fleets from all risks they face. The data generated by the telematics devices has to be incorporated into a well-managed risk management program for fleets to see safety results. Fleets often are overwhelmed with data and don’t have the time or resources to fully evaluate and learn from it.

Also, being able to coach drivers on their specific patterns of behavior can go a long way toward improving safety. Additionally, fleets need to demonstrate they have done everything the right way to avoid nuclear verdicts. The data obtained also can and should be used to coach, manage, and reward drivers which tends to significantly improve their safety and engagement. 

In many cases, insurance companies are not keeping up with the evolution of technology within the for-hire transportation industry. The reality is that today, many insurers don’t offer price breaks to a fleet that has ADAS systems in their vehicles. Even if a fleet fits its vehicles with the latest and greatest technology, they will not realize immediate, upfront savings. The best way for a fleet to ensure that they get an excellent insurance policy is to constantly think of safety, not just in the short period when they are actively shopping for insurance.

Implementing safety technologies, such as road-facing dashcams, can be costly upfront. However, they will provide both immediate and long-term benefits that will far outweigh the temporary challenges. Integrating baseline technology will quickly help improve a fleet’s safety performance and efficiency of their operation and help reduce the probability of losses. 

Expansion of New york State Paid Family Leave Law

New York State’s Paid Family Leave Program (PFL) is an insurance program administered by the state that enables workers in New York to take up to 12 weeks of paid time off in order to care for a seriously ill family member, bond with a new child or to address certain issues related to family members’ military service. The program is entirely funded by employees; employers do not have to pay employees’ salaries while they are on leave. Under PFL, employees who take leave will be guaranteed job protection. Employers must hold the employee’s position until he or she returns to work, or must offer a comparable position with equivalent seniority, status, employment benefits, pay and other terms and conditions.

Under the original law, workers were able to take paid time off in order to care for a seriously ill family member. Originally, the legal definition of “family member” included children, grandchildren, spouses, domestic partners, parents, parents of spouses or partners, siblings or grandparents. Now, the legal definition of “family member” has recently been expanded to include siblings. On November 1, 2021, Governor Kathy Hochul signed a bill (S.2928-A/A.06098-A) that expands New York State's Paid Family Leave legislation to allow caring for siblings (biological or adopted). The bill will go into effect on January 1, 2023.

This bill builds upon the Paid Family Leave legislation that was enacted in 2016, which created one of the most comprehensive paid family leave programs in the nation. In effect since 2018, New York's Paid Family Leave program is employee-paid insurance that provides workers with job-protected, paid time off to bond with a newly born, adopted or fostered child; care for a family member with a serious health condition (which may include severe cases of COVID-19), or assist loved ones when a member of the family is deployed abroad on active military service. Paid Family Leave may also be available in some situations when an employee or their minor, dependent child is under an order of quarantine or isolation due to COVID-19. Eligible workers may take up to 12 weeks off at 67% of their pay (up to a cap) to care for family members in times of need.

The strong bond siblings share is undeniable. For many individuals siblings may be the only family member available to assist and provide health care in their time of need and it has happened so often during the COVID pandemic.

The Importance of Finding the Right Attorney and Preventing Problems Before They Occur

I think more and more in any business you need to find the right expert and specialist for your needs.. When you are negotiating a lease in this city I would want a real estate attorney who understands this city, real estate, landlords and the life-cycle of a restaurant. The same with respect to my liquor license. I would look for someone who understands community boards, the SLA and the issues you face in your geographic region.  If you don’t get that license, you don’t have a business.  The same with a labor lawyer—cutting corners now won’t help.  Start your payroll properly now and understand the tip laws and immigration issues. There are a number of lawyers certainly in New York that understand the restaurant business. You should not be opening a restaurant if you don’t have the right accountant who understands the restaurant business, cash flow and operational expenses. Getting the right advice at the beginning is infinitely cheaper than paying on the backend. 

I generally tell people coming to be at the beginning of a project that for five – ten thousand dollars worth of advice at the start from me or someone similar, and setting up handbooks, making sure your employment documents are right, training and making sure you have the right payroll set up and the right payroll company in place, you  can literally avoid a million dollar settlement three years later. The difference is that much—or more—assuming you follow the advice at the beginning.  I know how tight margins are, but if you don’t spend that money prospectively I guarantee some disgruntled ex-employee will find his way to the department of labor or a plaintiff’s attorney and will find some way to hurt you and your business.

Outside General Counsel and Alternative Fee Arrangements

Practical Legal Counsel for New York companies and startups

Many of our clients are entrepreneurs or growing and mid-sized business that are large enough to require advice on sophisticated legal issues but not yet ready to employ a full time in-house lawyer.  We satisffy the legal needs of our clients by acting as their outside general counsel.  Our familiarity with the legal issues that growing businesses face, and our relationship as trusted advisors, allows us to anticipate the legal risks our clients are likely to face. We then develop strategies to address those risks before they reach a critical stage such as one that may or will involve litigation.  In addition, by acquiring an intimate knowledge of our client’s businesses, we are able to provide legal support consistent with our clients’ needs and budgets.  the Shanker Law Firm works proactively with our clients as an integrated part of their C-Suite and business team to effectively and efficiently manage the legal issues they face.  Examples of the type of outside general counsel services we frequently provide to our clients include:

• Maintaining Corporate Governance Documentation

• Corporate restructuring

• Counseling officers and directors

• Filing and monitoring trademark applications

• Drafting employment agreements, NDAs and non-competition agreements

• Drafting and negotiating commercial contracts

• Employee termination advice and support

• Advice regarding regulatory compliance

• Risk management

• Insurance

• Selecting, retaining and serving as liaison with local counsel, on an as needed basis

We offer clients real fixed-fee billing for our outside general counsel services, which gives clients financial predictability and creates a true virtual law department.  We determine the fixed fee based on a client’s individual needs and our experience. This is not a “retainer” relationship in which a client pays in advance for a given number of attorney hours – which only benefits the law firm, not the client.  We provide the same cost-effective rates that are a fraction of those commonly seen elsewhere in the marketplace under the more traditional hourly services model.

Our law firm has a proven track record for success inside and outside of the courtroom. We represent companies to protect their interests and assets and to guide and them when counseling is what they need the most. We deliver assertive representation that can supplement an existing legal department or we can serve as your outsourced in-house counsel. Whether you are a start-up company still building your team or an established corporation, we provide general counsel services designed with your needs in mind. Our mutually beneficial fee structure will help you stay within budget while managing your legal needs.