DOS-26-15-00002-E Rules Relating to Insurance and Bond Requirements
7/1/15 N.Y. St. Reg. DOS-26-15-00002-E
NEW YORK STATE REGISTER
VOLUME XXXVII, ISSUE 26
July 01, 2015
RULE MAKING ACTIVITIES
DEPARTMENT OF STATE
EMERGENCY RULE MAKING
I.D No. DOS-26-15-00002-E
Filing No. 507
Filing Date. Jun. 10, 2015
Effective Date. Jun. 10, 2015
Rules Relating to Insurance and Bond Requirements
PURSUANT TO THE PROVISIONS OF THE State Administrative Procedure Act, NOTICE is hereby given of the following action:
Action taken:
Repeal of section 160.9; and addition of new section 160.9 to Title 19 NYCRR.
Statutory authority:
Executive Law, section 91; General Business Law, sections 402(5) and 404
Finding of necessity for emergency rule:
Preservation of public health, public safety and general welfare.
Specific reasons underlying the finding of necessity:
The Department of State (“Department”) is charged, inter alia, with the enforcement of New York General Business Law (“NY GBL”) Article 27, which relates to the appearance enhancement industry. A principal purpose behind the enactment of Article 27 was to provide a system of licensure of appearance enhancement businesses and operators that would both allow for the greatest possible flexibility in the establishment of regulated services and implement measures to protect those inextricably entwined in the industry. Consistent with this legislative intent of Article 27, the Department is empowered to issue regulations which protect the general welfare of the public, including workers employed by business owners. Notwithstanding existing laws and regulations, a number of businesses have taken unfair advantage of a significant number of licensed workers who contribute to the community and economy. The ease with which some establishments have been able to deprive workers of fair wages and other rights is due in part to inadequate protections.
To help ensure that workers receive wages that are legally due, new bonding and insurance requirements are needed. The enhancement of public safety, health and general welfare necessitates the promulgation of this regulation on an emergency basis. The Department finds that by imposing new bonding and insurance provisions potential abuses by unscrupulous business owners will be reduced and hardworking employees will be protected.
Subject:
Rules relating to insurance and bond requirements.
Purpose:
To enhance protections to workers by adding new provisions requiring wage coverage.
Text of emergency rule:
Section 160.9 of Title 19 of the NYCRR is repealed and a new 160.9 is added to read as follows:
19 NYCRR § 160.9 Bond or liability insurance
(a) An owner must maintain proof of minimum financial security in the following amounts:
(1) for accident and professional liability, at least $25,000 per individual occurrence and $75,000 in the aggregate; and
(2) for payment of wages and remuneration legally due employees who provide nail specialty services pursuant to the following schedule:
(i) if owner employs the equivalent of two to five full time individuals who provide nail specialty services, at least $25,000 or in such other amount as directed by the Secretary;
(ii) if owner employs the equivalent of six to ten full time individuals who provide nail specialty services, at least $40,000 or in such other amount as directed by the Secretary;
(iii) if owner employs the equivalent of 11 to 25 full time individuals who provide nail specialty services, at least $75,000 or in such other amount as directed by the Secretary; or
(iv) if owner employs the equivalent of 26 or more full time individuals who provide nail specialty services, at least $125,000 or in such other amount as directed by the Secretary.
(b) Such proof may be satisfied by purchasing:
(1) accident and professional liability insurance, or general liability insurance; or
(2) a bond with a corporate surety, from a company authorized to do business in this state, payable in favor of the people of the state of New York; or
(3) any combination of (1) or (2) as provided in this Subdivision provided that the coverage amounts set forth in Subdivision (a) of this Section are satisfied.
(c) Proof of bond and liability insurance coverage, as applicable, must be filed with the Secretary and may be terminated only in accordance with the following provisions:
(1) A bond shall not be cancelled, revoked, or terminated by the owner, nor shall the owner take action that would result in the cancellation, revocation, or termination of such bond, except after notice to, and with the consent of, the Secretary at least forty-five days in advance of such cancellation, revocation, or termination. The bond shall include a provision requiring the surety to provide forty-five days' notice to the Secretary prior to cancelling the bond.
(2) A liability insurance policy obtained pursuant to this Section shall not be cancelled, revoked, or terminated by the owner, nor shall the owner take action that would result in the cancellation, revocation, or termination of such insurance policy, except after notice to the Secretary at least forty-five days in advance of such cancellation, revocation, or termination, in a form prescribed by the Secretary.
(d) Proof of such bond or liability insurance policy must be maintained on the business premises. Such proof shall be accessible by all employees at all times that the business is open.
(e) An owner will be permitted to maintain a bond or liability insurance policy as required by former Section 160.09 until June 30, 2015. All owners shall comply with the provisions of this Section on or after July 1, 2015.
This notice is intended
to serve only as a notice of emergency adoption. This agency intends to adopt this emergency rule as a permanent rule and will publish a notice of proposed rule making in the State Register at some future date. The emergency rule will expire September 7, 2015.
Text of rule and any required statements and analyses may be obtained from:
David A. Mossberg, Esq., NYS Dept. of State, 123 William Street, 20th Fl., New York, NY 10038, (212) 417-2063, email: david.mossberg@dos.ny.gov
Regulatory Impact Statement
1. Statutory Authority:
New York Executive Law § 91 and New York General Business Law (“GBL”) §§ 402(5); 404 and 405(2). Section 91 of the Executive Law authorizes the Secretary of State to: “adopt and promulgate such rules which shall regulate and control the exercise of the powers of the department of state.” In addition, Sections 405(1) and 404 of the GBL authorize the Secretary of State to promulgate rules specifically relating to the appearance enhancement industry. Section 405(2) requires an appearance enhancement licensee to be bonded or insured.
2. Legislative Objectives:
Article 27 of the GBL was enacted, inter alia¸ to provide a system of licensure of appearance enhancement businesses and operators that would allow for the greatest possible flexibility in the establishment of regulated services, while establishing measures to protect members of the public, including those who work in the industry. Consistent with this legislative intent, the Department is empowered to issue regulations that accomplish these purposes.
3. Needs and Benefits:
It has come to the attention of the Department that a number of appearance enhancement businesses may be engaging in exploitive practices to deprive employees who provide nail specialty services of wages due. Individuals providing nail specialty services to the public have been particularly impacted. While the regulations of the Department, in accord with statutory mandate, have long required bonding or insurance for the protection of the public welfare, the Department finds that new and more particularized bonding and insurance requirements are needed to help ensure that employees that provide nail specialty services receive the wages and benefits they have earned.
After consulting with the Department of Labor and advocacy groups, it was determined that this regulation is needed to help protect the wellbeing of employees who provide nail specialty services to the public.
4. Costs:
a. Costs to regulated parties:
Prior regulatory requirements were primarily concerned with liability coverage, whether by bond or insurance. The majority of appearance enhancement business owners satisfied their obligations by obtaining an insurance policy in the required amount of $25,000 per occurrence and $75,000 in the aggregate. This rulemaking maintains such liability requirement and adds a new requirement that the business’ payment of wages and remuneration legally due employees who provide nail specialty services be guaranteed in amounts keyed to the number of such individuals employed by the business owner and the amount of hours that these employees work on a weekly basis. Therefore, the cost to the regulated parties is the cost of acquiring the wage guarantee.
The Department is informed that for purchasers in good credit standing, the cost of acquiring a “wage bond” is likely to be 2 - 4% of the amount of the bond. Thus, a surety bond in the amount of $25,000 (2 – 5 employees) would range between $500 and $1,000. Businesses employing more individuals are required to maintain greater coverage. Bond amounts and cost of acquisition are as follows: $40,000 for 6 -10 individuals, $800 -$1,600; $75,000 for 11 – 25 individuals, $1,500 - $3,000, and $125,000 for 26 or more individuals, $2,500 - $5,000.
b. Costs to the Department of State, the State, and Local Governments:
The Department does not anticipate any additional costs to implement the rule. Existing staff will manage new filing requirements.
5. Local Government Mandates:
The rule does not impose any program, service, duty or responsibility upon any county, city, town, village, school district or other special district.
6. Paperwork:
The rule requires a licensee to file proof of its bond and insurance coverage with the Secretary and to notify the Secretary of the bond or insurance policy’s impending cancellation.
7. Duplication:
This rule does not duplicate, overlap or conflict with any other state or federal requirement.
8. Alternatives:
The Department considered not proposing the instant rulemaking. It was determined, however, that this rule is immediately needed to protect the general welfare of a significant population of practitioners who have been deprived of legally due wages.
9. Federal Standards:
The proposed amendments do not exceed any minimum standards of the federal government for the same or similar subject areas.
10. Compliance Schedule:
As stated in the emergency rule itself, compliance will be required by July 1, 2015.
Regulatory Flexibility Analysis
1. Effect of rule:
In addition to continuing the requirement that appearance enhancement business owners acquire and maintain liability insurance, this rulemaking requires appearance enhancement business owners to acquire and maintain a guarantee by a surety or insurer for the business’ payment of wages and remuneration legally due employees. The rule will protect employees who provide nail specialty services from the exploitive and pernicious practice of wage theft. There are 26,753 appearance enhancement businesses and 7,764 area renters in New York State that may be subject to this rule. Compliance is required depending upon the numbers of persons employed who provide nail specialty services, and the number of hours per week that they work.
2. Compliance requirements:
Prior regulatory requirements provided that appearance enhancement business owners provide liability coverage, whether by bond or insurance, in the amount or $25,000 per occurrence and $75,000 in the aggregate. This rulemaking maintains such liability requirement, and adds a new requirement that the business’ payment of wages and remuneration legally due employees and providers of appearance enhancement services be guaranteed in amounts keyed to the number of individuals who provide nail specialty services that are employed by the business owner and the number of hours that they work on a weekly basis. The rule requires a licensee to file its bond and insurance, as applicable, with the Secretary and to notify the Secretary of any impending cancellation of the bond or insurance. Additionally, the rule continues the current requirement that owners maintain proof of such coverage at the licensed business premises.
3. Professional services:
The Department does not anticipate the need for professional services.
4. Compliance costs:
Prior regulatory requirements were primarily concerned with liability coverage, whether by bond or insurance. The majority of appearance enhancement business owners satisfied their obligations by obtaining an insurance policy in the required amount of $25,000 per occurrence and $75,000 in the aggregate. This rulemaking maintains such liability requirement and adds a new requirement that the business’ payment of wages and remuneration legally due employees who provide nail specialty services be guaranteed in amounts keyed to the number of such individuals employed by the business owner and the amount of hours that these employees work on a weekly basis. Therefore, the cost to the regulated parties is the cost of acquiring the wage guarantee.
The Department is informed that for purchasers in good credit standing, the cost of acquiring a “wage bond” is likely to be 2 -4% of the amount of the bond. Thus, a surety bond in the amount of $25,000 (2 – 5 employees) would range between $500 and $1,000. Businesses employing more individuals are required to maintain greater coverage. Bond amounts and cost of acquisition are as follows: $40,000 for 6 -10 individuals, $800 -$1,600; $75,000 for 11 – 25 individuals, $1,500 - $3,000, and $125,000 for 26 or more individuals, $2,500 - $5,000.
5. Economic and technological feasibility:
The amount of coverage required and thus, the cost of acquiring such coverage, has been keyed to the relative size of the business. The smallest business identified, one that employees 2-5 individuals, may expend as little as $500 to comply with new “wage bond” requirement. Although additional collateral may be required to secure the bond, the Department believes it is both economically and technically feasible to comply with this rule.
6. Minimizing adverse impact:
The Department did not identify any alternatives that would achieve the results of the proposed rule and also be less restrictive and less burdensome in terms of compliance. The Department has consulted with Department of Labor and several advocacy groups and finds that this rule is necessary for the wellbeing of those who engage in appearance enhancement practices.
7. Small business and local government participation:
The Department, in conjunction with other state agencies, has consulted with small business interests, both businesses and organizations, that may be affected by this rule. Although this particular proposal was not presented, businesses were, generally, supportive and amenable to the changes discussed.
8. Compliance:
As stated in the emergency rule, itself, compliance will be required by July 1, 2015.
9. Cure period:
The Department is not providing for a cure period prior to enforcement of these regulations. The Department finds that protecting the wages of workers is a significant public concern. In addition, as this rule is not effective until July 1, 2015, the Department believes that those employers impacted by this rule will have sufficient time to comply. Accordingly, the Department finds that a cure period is not appropriate.
Rural Area Flexibility Analysis
1. Types and estimated numbers of rural areas:
The rule will apply to appearance enhancement businesses that are licensed pursuant to Article 27 of the General Business Law. There are approximately 26,753 appearance enhancement businesses and 7,764 area renters across New York State that may be subject to this rule. Licensed owners are responsible for complying with this rule.
2. Reporting, recordkeeping and other compliance requirements; and professional services:
Prior regulatory requirements provided that appearance enhancement business owners provide liability coverage, whether by bond or insurance, in the amount or $25,000 per occurrence and $75,000 in the aggregate. This rulemaking maintains such liability requirement, and adds a new requirement that the business’ payment of wages and remuneration legally due individuals who practice nail specialty services be guaranteed in amounts keyed to the number of individuals who provide nail specialty services that are employed by the business owner and the number of hours that they work on a weekly basis. The rule requires a licensee to file its bond and insurance, as applicable, with the Secretary and to notify the Secretary of any impending cancellation of the bond or insurance. Additionally, the rule continues the current requirement that the owners maintain evidence of such coverage at the licensed business premises. No different or additional compliance requirements apply to businesses located in rural areas.
3. Costs:
Prior regulatory requirements were primarily concerned with liability coverage, whether by bond or insurance. The majority of appearance enhancement business owners satisfied their obligations by obtaining an insurance policy in the required amount of $25,000 per occurrence and $75,000 in the aggregate. This rulemaking maintains such liability requirement and adds a new requirement that the business’ payment of wages and remuneration legally due employees who provide nail specialty services be guaranteed in amounts keyed to the number of such individuals employed by the business owner and the amount of hours that these employees work on a weekly basis. Therefore, the cost to the regulated parties is the cost of acquiring the wage guarantee.
The Department is informed that for purchasers in good credit standing, the cost of acquiring a “wage bond” is likely to be 2 -4% of the amount of the bond. Thus, a surety bond in the amount of $25,000 (2 – 5 employees) would range between $500 and $1,000. Businesses employing more individuals are required to maintain greater coverage. Bond amounts and cost of acquisition are as follows: $40,000 for 6 -10 individuals, $800 -$1,600; $75,000 for 11 – 25 individuals, $1,500 - $3,000, and $125,000 for 26 or more individuals, $2,500 - $5,000.
4. Minimizing adverse impact:
The Department has consulted with Department of Labor and several advocacy groups, but did not identify any alternatives that would achieve the results of the proposed rules and at the same time be less restrictive and less burdensome in terms of compliance. Businesses in rural areas will not be impacted any more or less than businesses in other areas.
5. Rural area participation:
The Department, in conjunction with other state agencies, has consulted with business interests which may be affected by this rule. Publication of this rule in the New York State Register will provide notice to those in rural areas and afford everyone an opportunity to comment. The Department has posted a copy of this rule on the Department’s website, which will provide additional opportunity for rural area participation.
Job Impact Statement
1. Nature of impact:
This rulemaking will help to insure the payment of wages lawfully due and owing to individuals who provide nail specialty services. Insomuch as this rulemaking will help protect workers, the Department believes that it will have a positive impact on jobs and employment opportunities. Specifically, more workers may seek employment in this industry if they know that their wages will now be guaranteed.
2. Categories and numbers affected:
There are approximately 26,753 appearance enhancement businesses and 7,764 area renters in New York State that may be subject to this rule.
3. Regions of adverse impact:
The proposed rulemaking will not have any disproportionate regional adverse impact on jobs or employment opportunities.
4. Minimizing adverse impact:
The Department considered not proposing the instant rulemaking. It was determined, however, that this rule is immediately needed to protect the general welfare of a significant population of individuals who have been deprived of legally due wages. The Department has consulted with Department of Labor and several advocacy groups, but did not identify any alternatives that would achieve the results of the proposed rules and at the same time be less restrictive and less burdensome in terms of compliance.
Assessment of Public Comment
The agency received no public comment since publication of the last assessment of public comment.
