Add §§151-a & 151-b, Work Comp L; add §99-tt, St Fin L
Establishes a fraud assessment commission; directs the chair of the workers' compensation board, in consultation with the workers' compensation fraud inspector general and the fraud assessment commission, to establish an assessment for workers' compensation fraud investigations to fund the investigation and prosecution of workers' compensation fraud, willful failure to secure payment of workers' compensation, and failure to keep true and accurate records; establishes the workers' compensation fraud investigation fund in the joint custody of the chair of the workers' compensation board, the commissioner of labor, and the comptroller, which shall consist of monies received from the imposition of the assessment for workers' compensation fraud investigations.
NEW YORK STATE ASSEMBLY MEMORANDUM IN SUPPORT OF LEGISLATION submitted in accordance with Assembly Rule III, Sec 1(f)
BILL NUMBER: A8429B
SPONSOR: Bronson TITLE OF BILL:
An act to amend the workers' compensation law, in relation to establish-
ing a fraud assessment commission and an assessment for workers' compen-
sation fraud investigations; and to amend the state finance law, in
relation to establishing the workers' compensation fraud investigation
fund
PURPOSE OR GENERAL IDEA OF BILL::
This bill would create a Fraud Assessment Commission that will advise
the Workers Compensation Board Chair and the Workers Compensation Inves-
tigator General on necessary Assessments and allocation of funds to
support local prosecutors in the investigation and prosecution of work-
ers compensation fraud.
SUMMARY OF SPECIFIC PROVISIONS::
The bill amends Article 8 of the Workers Compensation law, adding a neW
Section 151-A.
Establishes legislative intent regarding rampant workers compensation
Fraud in the Construction industry and the need to fund investigations
and prosecutions at the local level.
Section one establishes a Fraud Assessment Commission and outlines
composition of the board.
Section two establishes an Assessment for Workers Compensation Fraud
Investigations to be established by the Chair of the Workers Compen-
sation Board and the Workers Compensation Investigator General in
consultation with the Fraud Assessment Commission no later than November
1, 2025.
Section three establishes the Workers Compensation Fraud Investigation
Fund in joint custody of Chair the Workers Compensation Board and
Commissioner of the Department of Labor, as well as outlines the Admin-
istration of funds and the process for grants to district attorneys and
local prosecutors.
Section four establishes the process by which the Chair of the Workers
Compensation Board or the Workers Compensation Investigator General can
discontinue funds to district attorneys unwilling or unable to investi-
gate and prosecute workers compensation Fraud.
Section five establishes reporting process for the Fraud Assessment
Commission on the Workers Compensation Investigation Fund.
Section six establishes effective date.
JUSTIFICATION::
Workers' Compensation Fraud is a growing problem in the construction
industry. Nationwide, up to 19% (2.1 million) of construction workers
are paid off the books or misclassified as independent contractors,
which has resulted in a net premium loss of $5 billion.1 In New York
State, the annual loss in premiums is estimated at $616.4 Million annu-
ally; which resulted in an estimated loss in Workers Compensation
Assessments of $57 million in 2024, and $44 million in 2025 (based on
Workers' Compensation Assessments of 9.2% in 2024 and 7.1% in 2025).
The Assessment in New York State supports several important special
funds, including one that compensates volunteers who were injured or
disabled during the World Trade Center rescue, recovery, or cleanup.
While the Workers Compensation Board and Workers Compensation Investi-
gator General have worked hard to combat fraud throughout New York
State's Workers Comp Program, there need to be resources available for
prosecutors at the local level. The structures in the construction
industry that facilitate Workers Comp Fraud are exceedingly complex and
sophisticated and limit liability on Owners, General Contractors,
Construction Managers, and Specialized Subcontractors. They hinge on
facilitated relationships with shadowy shell companies and labor
brokers, which facilitate cash payments off the books to workers, thus
allowing rampant premium fraud through employee misclassification as
well as fraudulent (and minimal) certificates of insurance.
These labor broker/shell company/facilitator relationships are complex
and require extensive resources from local prosecutors to effectively
prosecute. The only way to truly target Workers Compensation Fraud is by
giving local prosecutors the tools and wherewithal to do so. First and
foremost, New York needs to incentivize effective strategies and dedi-
cate resources for prosecuting Workers Compensation Fraud as it is iden-
tified.
We are proposing a model based on the California Workers Compensation
Insurance Fraud Program that incentivizes local prosecutors to target
workers compensation premium fraud at its root.
Sources:
"Up to 2.1 Million U.S. Construction Workers Are Illegally Misclassified
or Paid off the Books." The Century Foundation, 13 Nov. 2023,
tcf.org/content/report/up-to-2-1-million-u-s-construction-workers-are-il
legally-misclassified-or7paid-off-the-books/.
Admin. "New York Reduces Workers' Compensation Assessment Rate for
2025." Insurance Journal, 31 Oct. 2024,
www.insurancejournal.com/news/east/2024/10/31/799250.htm :-:text=The%2Or
ate%20asse
ssed%20on%20standard,on%20its%20estimated%20annual%20expenses.
PRIOR LEGISLATIVE HISTORY::
New bill.
FISCAL IMPLICATIONS FOR STATE AND LOCAL GOVERNMENTS::
None. Workers Compensation Fraud Investigation Fund will be funded
thrdugh by additional assessment for workers compensation fraud investi-
gations.
EFFECTIVE DATE::
Immediately.
