The Real Estate Board of New York to The Office of the New York City Comptroller re: Wage Requirements for Construction Employees

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The Real Estate Board of New York (REBNY) is the City's leading real estate trade association. Founded in 1896, REBNY represents commercial, residential, and institutional property owners, builders, managers, investors, brokers, salespeople and other organizations and individuals active in New York City real estate. REBNY appreciates the opportunity to comment on proposed rules to implement the wage requirements for construction employees under Real Property Tax Law Section 485-x, also known as the Affordable Neighborhoods for New Yorkers (ANNY) tax incentive program.

The issuance of this proposed rule is an important step forward for the 485-x program. Until a final rule is issued, there will be significant ambiguity about compliance with the construction wage provisions of the program. This uncertainty creates additional risk for owners, developers, and contractors and further inhibits utilization of the program, which has yet to support a project of 100 units or more.

However, while we appreciate the publication of the proposed rule, numerous provisions in the proposal go beyond the requirements set forth in the statute and will make the program even more challenging for developers and contractors. Additionally, aspects of the proposed rule will elevate construction labor costs above what is called for in the statute, making it even less likely that developers move forward with larger 485-x projects. With this in mind, we offer the following comments.

Defining and Calculating Wages: The proposed rules clearly deviate from the statutory definition of the term "wages" and limits the term to mean only hourly pay, excluding employer payroll taxes and legally required contributions. In doing so, the proposed rule conflicts with the statute's broader definition of wages-which explicitly includes, without limitation, employee benefits, employer-paid taxes, and certain other payments. The proposed rule should be modified to conform with the definition in the statute to avoid creating significant uncertainty about what types of payments are considered wages.

Additionally, the proposed rule states that where a project uses the statutory fixed-dollar rate instead of the percentage of the "greatest" rate, the supplement portion may not exceed 50% of total compensation. This requirement limits the ability of the employer to structure competitive compensation packages and could produce inconsistent outcomes across classifications. The cap should be removed, or at minimum, a safe harbor established that would allow benefits to be provided above the schedule rate where collectively bargained so long as the total required wage and supplement amount is met or exceeded.

Definition and Application of "Greatest Prevailing Rate": For certain projects, the statute requires payment of wages based on the "greatest prevailing rate." The proposed rule defines "greatest" as the highest rate for a classification in the Comptroller's schedules and does not incorporate the tiers based on experience that are included in the Comptroller's wage schedule. This same standard also applies for overtime, weekend, and holiday pay. Applying the top highest rate regardless of a worker's experience will raise costs and diverges from prevailing wage norms that tie rates to experience or apprenticeship progression. The proposed rule should be amended to align with the experienced-based progression standards that are well established parts of the Comptroller's wage schedule.

Calculating Fringe Benefits: The proposed rule defines the term "Bona Fide Fringe Benefits" to include paid sick leave, but then expressly exclude benefits "required by law" (i.e., government-mandated payments) from counting toward satisfaction of the scheduled supplements. This deviates from the way the term "wages" is defined in the statute to incorporate these types of payments (the term "wages" is relevant for this analysis as the statute does not define the term "fringe benefit"). Consistent with the statute, the proposed rule's definition of "Bona Fide Fringe Benefit" should be modified to expressly recognize payments such as federal and state unemployment insurance, NYS disability insurance, the metropolitan commuter transportation mobility tax, FICA, and other payroll taxes.

The definition in the rules is also inconsistent with respect to its specific reference to paid sick leave, as it is a benefit "required by law" because employers must provide New York City and New York State mandated paid sick leave. This lack of clarity creates confusion and will likely invite audit disputes due to internal inconsistencies. The proposed rule should clarify that legally required paid sick leave counts toward supplements for the purposes of providing bona fide fringe benefits.

Notification to Comptroller: In several ways, the proposed rule deviates from the statute and should be amended to more closely adhere to the text of the law. Specifically, the proposed rule requires applicants to notify the Comptroller five months prior to the commencement date of the anticipated location, commencement date, completion date, and provide a copy of the agreement if seeking an exemption from requirements due to the existence of a Project Labor Agreement ("PLA"), Collective Bargaining Agreement ("CBA"), or Jobsite Agreement. The statute does not support the Comptroller receiving such a request five months prior to the commencement date. Rather, the statute clearly states that such information must be submitted three months prior to the commencement date. The proposed rule should be modified to conform to the statute. In addition, the terms "commencement date" and "completion date" should be more clearly defined to reduce any ambiguity.

In addition, the proposed rule requires the developer to notify the Comptroller of any changes to ownership, commencement, completion, or existence of a PLA/CBA/jobsite agreement within 30 days after submitting notice to the Comptroller of the project. This requirement does not exist in the statute, as the purpose of the notification requirement is simply to inform the Comptroller that the project exists and is expected to commence in the future. The obligation to notify the Comptroller of changes imposes significant burdens on the developer, is not supported by the statute, and should be removed.

Similarly, the proposed rule stipulates that the Comptroller will grant or deny requests for an exclusion based on a PLA/CBA/jobsite agreement within 30 days. However, the statute does not authorize the Comptroller to undertake a review of the terms of any PLA/CBA/jobsite agreement, and as such the Comptroller's review should be limited to whether the PLA/CBA/jobsite is valid. In addition, the proposed rule would provide greater certainty for owners if, in the circumstance where the Comptroller fails to grant an exclusion within 30 days, the exclusion was to be automatically approved.

Finally, the documentation requirements for PLA/CBA/jobsite agreement waivers are unclear and may raise confidentiality concerns. For PLA/CBA/jobsite agreement waivers, the Comptroller should allow a certification attesting to an executed agreement, a summary of covered trades, and an in-camera review option, rather than mandatory submission of the full agreement, which may be viewed by the public, due to confidentiality concerns.

Recordkeeping and Record Production: The proposed rule imposes significant compliance obligations including a 6-year retention of payroll records, submission of certified payrolls, and owner maintained Daily Sign-In Logs with worker signatures. While the statute mandates 6-year payroll retention, it does not require the owner or employer to maintain signature-verified daily attendance logs or attest to the validity of contractor payroll reports under penalty of perjury, or to submit such records to the Comptroller.

These types of obligations will create significant burdens and compliance risks for owners and contractors, particularly in the very common situation where the owner is not the employer of record. Recognizing these challenges, the proposed rule should create a safe harbor for owners who designate the prime contractor to make such submissions, including language in their contracts requiring subcontractor compliance, and maintain a compliance plan. Owners who make good faith efforts to comply with these provisions should be recognized, given the significant risk and burden associated with maintaining these records across numerous employers.

In particular, the obligation to maintain for six years all "federal and state employment tax returns and filings, including, but not limited to, quarterly combined withholding, wage reporting, and unemployment insurance form NYS-45 returns; employers' quarterly Federal tax form 941 returns; wage and tax form W-2 statements; and miscellaneous income form 1099 statements" is incredibly onerous. Many contractors will likely resist these requirements due to privacy concerns and the sensitive nature of the information included in these documents. Furthermore, as construction employees may work on multiple projects that pay different rates, the information in these documents may not be most useful for the Comptroller.

For these reasons, given the significant risks for the owner/developer (who is generally not the employer) that result from failure to produce records, the Comptroller should commit to working with owners who, in good faith, make best efforts to comply. One tangible step the Comptroller could take is to publish guidance on acceptable electronic systems, data formats, and reasonable inference methodologies to be used in the situation where the owner is not the construction employer. This should include the explicit authorization for the use of electronic sign-in systems, including those that use facial recognition technology, provided the system meets specified verification standards set by the Comptroller. In addition, the Comptroller should make available a standard certified payroll report that all employers can use for the purpose of maintaining accurate records.

Benefit Recapture and Enforcement: The statute establishes that the Comptroller may terminate and recapture benefits after 3 violations in 5 years-each requiring a noncompliance finding and a "failure to cure" within 3 months-and requires after the second violation a notice and website posting. The potential for benefit termination and recapture raises significant risk for developers and lenders, and the process by which termination and/or recapture occurs must be clearly defined. For this reason, the proposed rule should establish that violations must be willful to result in benefit termination and/or recapture, which is consistent with New York Labor Law § 220.

In addition, the proposed rule defines "failure to cure" to include situations where "credible information" of continued violations is provided to the Comptroller. To reduce ambiguity, the term "credible information" should be defined to reduce instances where ordinary disputes or misunderstandings could result in a finding of "failure to cure."

Interaction with §220 and 220-b of the New York Labor Law: The 485x program requires any eligible site with 100+ units in New York City to comply with the requirements of §220 and 220-b of the New York Labor Law. This raises several issues because 220 and 220-b pertain to public work contracting not private contract work as will take place under 485-x. One of those issues is that §220 effectively states that construction workers (including those employed by contractors and subcontractors) may not be permitted or required to work more than eight (8) hours in a calendar day or more than five (5) days in a week, except in cases of extraordinary emergency or where the Commissioner of Labor grants prior approval. Based on the statute, it is unclear whether this language would prohibit overtime work on 485-x projects. The proposed rule should clarify this issue and any other ambiguities that could arise through the application of §220 and 220-b of the New York Labor Law to private contract work.

Treatment of Ground Lease Properties: In New York City, it is common for residential buildings to be constructed under a ground lease in which the fee owner continues to own the land, but the building is owned by the developer. When this occurs, the fee owner typically has no role in the development of the building during the term of the ground lease that generally lasts for a very long period. As such, the proposed rule should clarify that in a ground lease scenario, the fee owner is not liable for violations of the developer or contractor working on the development project. Absent this clarity, fee owners may be unwilling to take on the liability associated with allowing new mixed-income housing under the 485-x program to be built under a ground lease arrangement, inhibiting uptake of the program.

Delivery and Hauling: The statute and proposed rule state that the provision of materials is included in the term construction work. However, neither the statute nor proposed rule clarifies when employees hauling to/from the job site are subject to the wage standards given that the statute and proposed rule limit construction employees to those performing construction work as a laborer, worker, or mechanic. The lack of clarity creates confusion and may result in inconsistent compliance and enforcement. The proposed rule should create a clear standard that delivery/hauling is covered only when drivers perform on-site construction activities integral to the work and are primarily assigned to the covered site during the construction period. Specific examples should be provided to help clarify this issue for employers.

Worker Notices: New York Labor Law §220 requires posting and individualized worker notices. The proposed rule requires a weatherproof 2' × 2' onsite poster in a prominent location but does not address individualized notices at hire or on paystubs. The absence of guidance on individualized notices may cause confusion for workers and contractors alike. The proposed rule should be clarified to align with NYLL §220 by clarifying that only the poster is required under 485-x, or-if individualized notices are intended-provide official forms and a safe harbor delivery method (e.g., at onboarding and with the first paystub) to avoid technical violations.

Definition of Applicant: The definition of Applicant is overbroad and could be interpreted to capture consulting firms and law firms that submit an application on behalf of the Owner. The statute does not include a definition of the term Applicant and would have included it if the legislature wanted consulting firms and law firms to be jointly and severally liable for complying with the law's requirements. The definition of Applicant should be amended to change "Person" to "Owner."

Thank you.