Owner-Operator Model Still Threatened And More

By Henry E. Seaton
May 2010
Reprinted from:www.ccjdigital.com / etrucker.com

Q: Is the new healthcare bill going to make us convert our independent contractors to employees?

A: There is nothing in the healthcare bill that addresses reclassification directly, but the Coalition for Independent Contractor Freedom published a news release suggesting that the Obama administration is more likely to move quickly to address the alleged misclassification issue now that healthcare has passed.

The Messenger Courier Association of America, which has held two successful lobbying days on Capitol Hill in support of independent contractors, reports that from a federal perspective there are three legislative initiatives and one administrative initiative that affect the trucking industry’s use of owner-operators as independent contractors. The legislative initiatives are:

  • The inclusion by the Obama administration of a provision in the new budget bill that would direct the Internal Revenue Service and the Treasury Department to rewrite rules for the classification of independent contractors, repealing the 20-part test and existing favorable law;
  • Senate Bill 2882, introduced by Sen. John Kerry (D-Mass.); and
  • House Bill 3408, introduced by Rep. Jim McDermott (D-Wash.).

These three bills clearly portray the majority’s asserted effort to repeal favorable case law, including the so-called safe harbor provisions that allow a company charged with misclassification to rely upon past industry practice. A repeal of the safe harbor provisions would result in loss of the North American Van Lines precedent that permits lease-to-own arrangements between carriers and owner-operators.

Legislative initiatives would repeal favorable case law.

In addition to the legislative initiatives, the administration issued directives to the IRS, which is processing 2,000 targeted payroll tax initiatives on companies suspected of misclassification with the threat of criminal charges. An IRS and state information sharing task force has been established to aid in these targeted audits.

Thus, notwithstanding a few successful court cases (see “A great decision for owner-operators,” November 2009), the push to eliminate independent contractors remains unabated. Constant battles are being waged at the state level to defeat pro-labor initiatives that would force independents to be treated as employees for worker’s compensation and overtime purposes. The proponents of reclassification already view the independent contractor model as a mere subterfuge for depriving working Americans of welfare benefits and federal and state coffers of needed tax revenue.

The healthcare bill mandates that companies with more than 50 employees purchase healthcare or pay a penalty. As any small businessman knows, affordable health insurance traditionally has been available only to large preformed groups. I predict the mandate in the healthcare reform program that everyone buy health insurance will put additional pressure on the independent contractor model, unless some way is fashioned for independent contractors – typically small one- to five-employee companies – to obtain their own insurance at reasonable premiums.

The paradigm of the healthcare reformers and the reclassification advocates sees the economy only in 19th century economic terms: The captains of industry versus workers, the latter of which incorporate the middle class. Clearly, owner-operators are not seen by the current Congress and administration as small independent businessmen who need special treatment and consideration as required by the National Transportation Policy. I continue to fear that independent contractors and the small motor carriers that depend upon them are not making their case for the preservation of the owner-operator model as essential to the survival of small businesses.

The upcoming midterm elections and the aftermath of the healthcare bill suggest that an important tipping point is approaching rapidly.

Article printed from Commercial Carrier Journal: http://www.ccjdigital.com

URL to article: http://www.ccjdigital.com/law-3/

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