Relates to the establishment of a fraud assessment commission, an assessment for workers' compensation fraud investigations and the workers' compensation fraud…

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◆ The sponsor's argument

Why Jamaal Bailey says this is needed

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.' 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-areill egally-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-Thek20r ate4520assessedt2Oont2Ostanclard,onk2Oitsk2Oestimated*20annualVs20expens es.

This is the sponsor's own case for the bill, quoted from their memorandum. It is not Agora's description of what the bill does.