BILL NUMBER: S7950
SPONSOR: BAILEY
 
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
Investigator 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 1 establishes a Fraud Assessment Commission and outlines compo-
sition of the board.
Section 2 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 3 establishes the Workers' Compensation Fraud Investigation Fund
in joint custody of chair the Workers' Compensation Board and commis-
sioner of the Department of Labor, as well as outlines the adminis-
tration of funds and the process for grants to district attorneys and
local prosecutors.
Section 4 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 5 establishes a reporting process for the Fraud Assessment
Commission on the Workers' Compensation Investigation Fund.
 
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.l 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' Compensation Program, prosecutors need resources 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 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) certif-
icates 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
dedicate resources for prosecuting this fraud as it is identified.
This bill proposes a model based on the California Workers Compensation
Insurance Fraud Program, which 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-
illegally-misclassified-or-paid-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%20r
ate%2Oassessed%20on%20stanclard,on%20its%20estimated%20annual%20expenses.
 
PRIOR LEGISLATIVE HISTORY::
New bill.
 
FISCAL IMPLICATIONS::
None. The Workers' Compensation Fraud Investigation Fund will be funded
through by additional assessment for workers' compensation fraud inves-
tigations.
 
EFFECTIVE DATE::
Immediately.