Waynes World - May 2008
POLITICIANS & LAWMAKERS GO AFTER
INDEPENDENT CONTRACTORS - IS THIS...
THE BEGINNING OF THE
END FOR OWNER OPS
by Wayne Schooling
SURVEY NEEDS PARTICIPANTS. Since leaving the California Trucking Association, I have tried my best to keep from being political. But there comes a time when education of the masses must be done. If you are an owner operator or a motor carrier that utilizes the services of independent contractors, this article is for you. There are certain factions in this country that want to do away with independent contractors, one way or another, and it all comes down to money (actually, taxes and union dues). The Truckload Carriers Association (TCA) has commissioned a study to collect data on owner operators. The trucking industry is being threatened, as many owner operators (independent contractors) could be re-classified as employees. To fight this attack, TCA is asking trucking companies with owner operators to participate in this survey. One of the problems that arise in these employment classification cases is that many judges, hearing officers and legislators feel that independent contractors are forced to be such by employers who see it as a way to avoid employment taxes, fringe benefits, etc. In some cases, that may be true, but what these folks have failed to realize is that some people wish to create their own destiny. They do not want to work for someone else. These officials, for some reason, can’t grasp the idea of the value of entrepreneurship in trucking. To participate in the survey and to let your voice be heard, please contact James Hardman at (651) 483-5560 or e-mail him at jhardman5560@comcast.net. You can also call me at (562) 279-0557. You do not need to be a member of the TCA to participate, and if you wish, you can remain anonymous.
OBAMA TARGETS INDEPENDENTS. The fact that a U.S. Senator has filed a bill regarding independent contractors is not a major news item. But when the senator is Barack Obama and the bill (S.2044) is co-sponsored by another prominent Democrat, Senator Hillary Clinton, that is big news. Obama has zeroed in on an issue of great interest to the trucking industry – and to all who deal with employment issues on a daily basis. Obama’s bill would amend the Revenue Act of 1978 in three key areas: 1) It would require the employers to treat workers misclassified as independent contractors as employees for tax purposes; 2) It would repeal a ban on Treasury regulations or revenue rulings on employee and independent contractor classification issues; and 3) It would eliminate the defense of “Industry Practice” as a viable justification for misclassifying independent contractors. The bill would enable workers to petition the Treasury Secretary for clarification of their status and it would prohibit an employer from retaliating against any worker filing these petitions. Language describing the petition process would be added to the required workplace postings regarding employment rights. Finally, the bill would also require any employer hiring an “independent contractor” to provide the following notice to every individual: “Each employer shall notify any individual who is hired as an independent contractor of their Federal tax obligations as an independent contractor, the labor and employment law protections that do not apply to independent contractors, and the right of such independent contractors to seek a status determination from the IRS.”
THE FEDEX FACTOR. Obama’s bill may die in committee but, to some degree, it reveals the presidential candidate’s thinking and that is a significant point. I imagine that FedEx is paying close attention, as the embattled delivery behemoth is fighting – and losing – a state-by-state defense of its hiring practices. Those “independent contractor” drivers, in their FedEx trucks and FedEx uniforms, are looking more and more like employees (except for those few California contractors who were smart enough to contact NTA – I have never seen such a devoted bunch of guys fight so hard to remain independent). If S.2044 becomes law, or if Obama’s quest for the presidency succeeds, FedEx will probably have to throw in the towel or change the way they do business by hiring only independent contractors who have incorporated. Needless to say, FedEx is currently writing a few hefty checks to one of the “other” presidential candidates.
STATES TURN UP THE HEAT. One by one, the states are turning up the heat on independent contractor classification. On March 12, 2008 Massachusetts Governor Deval Patrick (Dem) signed Executive Order 499 creating a joint task force to identify and crack down on illegal misclassification of workers as independent contractors. Once again, it’s all about taxes. Governor Patrick and other state officials hope that the initiative will bring in millions of dollars in revenue from so-called unscrupulous business owners who dodge taxes and other costs by paying workers in cash or by misclassifying them as independent contractors. “Its happening all across the economy, from pizza shop owners to transportation companies,” said Labor and Workforce Development Secretary Suzanne Bump, who added that the initiative is modeled after similar efforts in California and New York. Though laws exist to prevent employers from paying workers in cash or misclassifying them as independent contractors, Bump said that a lack of coordination among state agencies has hindered enforcement. Patrick’s order requires state agencies to share information and clarify ambiguities in laws, such as differing definitions of independent contractor.
PROTECT YOUR RIGHTS. The only sure-fire way to combat this looming problem is to require all independent contractors to incorporate. This makes more business sense anyway, because it gives independent contractors more protection from lawsuits and it drops their tax rate. After all, why would anyone in their right mind want to be taxed at the higher sole proprietor rate of 34% or 39% when you can be taxed at the corporate level of only 15%! Being “independent” is at the core of every American – protect that right, before it’s too late! If you have any comments or questions, I can be reached at NTA at (800) 805-0040 or at wayne@ntassoc.com. If you would like more information about incorporating your business, please feel free to contact me.