MCAA Weekly Government Affairs Update: January 23, 2008
GOVERNMENT AFFAIRS NEWS
New Independent Contractor Definition in New Hampshire
A new definition of employee has gone into effect in New Hampshire. As of January 2008, employers must satisfy both the state and federal definitions to properly classify individuals as independent contractors. This new law also requires employers to post a “Know Your Rights” poster that includes the revised criteria used to define the classification of workers as employees or independent contractors. As of January 2008, to qualify as an independent contractor, the worker must meet each of the following criteria:
- The individual possesses or has applied for a federal employer identification number or social security number.
- The individual has control and discretion over the means and manner of performance of the work.
- The individual has control over the time when the work is performed, and the time of performance is not dictated by the employer.
- The individual hires and pays their assistants, if any, and to the extent such assistants are employees, supervises the details of the assistants’ work.
- The individual is sought out be in business for himself or herself.
- The individual has continuing or recurring business liabilities or obligations.
- The individual receives compensation for work or services performed and remuneration is not determined unilaterally by the hiring party.
- The individual is responsible in the first instance for the main expenses related to the service or work performed.
- The individual is responsible for satisfactory completion of work and may be held contractually responsible for failure to complete the work.
- The individual supplies the principal tools and instrumentalities used in the work, except that the employer may furnish tools or instrumentalities that are unique to the employer’s special requirements or are located on the employer’s premises.
- The individual is not required to work exclusively for the employer.
MCAA to Hold Second Independent Contractor Summit
The independent contractor business model continues to be under siege from state regulators, trial lawyers, and increasingly the federal government. The MCAA plans to hold an independent contractor summit on April 23, 2008 in Washington, DC. The summit will consist of educational sessions with outside speakers, closed-door discussions amongst MCAA members, and meetings on Capitol Hill with Members of Congress. More details will be available shortly.
The night before the summit, the MCAA will hold a congressional reception at the Madison Hotel. We are in the process of locating a Member of Congress who will spearhead our efforts and serve as our champion. We have several sympathetic Representatives in mind that are on the relevant committees to help our cause.
We will be asking that attendees to the congressional reception consider making a campaign donation and we have a goal of raising $10,000 for the event. For us to move forward with this we need to know if we stand a reasonably good chance to obtaining our financial goal. Any donations to a congressional campaign must be done by individuals not companies and the limit is $2,300 per individual.
Please email MCAA Executive Director, Bob DeCaprio, at bdecaprio@kellencompany.com if you can contribute directly to the congressional campaign of our identified champion.
Internal Revenue Service Aims to Clarify Standards
The IRS used the December 2007 issue of its Tax Gap publication to clarify its independent contractor guidelines. The fact sheet, “Employment Taxes and Worker Classification,” focuses on the level of control the worker has in the performance of his or her job. According to the fact sheet, three types of control are significant in employment. They are behavioral control, financial control, and the type of relationship. The fact sheet also contains helpful additional resources at the bottom of the page. To view the fact sheet, click the link. http://www.irs.gov/newsroom/article/0,,id=177092,00.html
IRS Slams FedEx for Misclassifying Independent Contractors
The Internal Revenue Service (IRS) notified FedEx in late December that it anticipated assessing tax and penalties of $319 million plus interest for misclassifying FedEx Ground delivery drivers in 2002. FedEx believes that ultimately it can persuade the IRS to accept its classification of the drivers. The issue is over employment taxes for some 15,000 drivers FedEx employs as contractors. FedEx’s use of independent contractors has generated lawsuits in 36 states.
FedEx has in its favor, analysts say, is that the IRS sanctioned the company’s use of independent contractors for pickup and delivery back in 1994 when the company was Roadway Package Systems (RPS). Analysts note that there have not been substantial changes in the business model since that agreement was signed.
In early January, FedEx said it is preparing to meet with an audit team from the IRS to discuss the IRS’s tentative conclusion that FedEx should reclassify its delivery drivers as employees rather than independent contractors. While FedEx says its employment structure is sound, analysts say it will take years to sort the issue out; including what FedEx might owe in back taxes for 2004-2006.
FedEx claims to be remaining committed to its business model for the time being. In mid January they announced it has no plans for major nationwide changes in the company’s reliance on contract drivers for its ground delivery division. FedEx currently utilizes more than 290,000 employees and contractors and has annual revenues of $36 billion.
Transportation Panel Recommends Increasing Gasoline Tax
The Wall Street Journal reports the National Surface Transportation Policy and Revenue Study Commission will recommend extensive improvements to the nation's transportation infrastructure and a massive increase in taxes. This 12-member board is chaired by United States Transportation Secretary Mary Peters.
Nine commissioners favor drastically boosting gasoline taxes. Gasoline taxes are currently the biggest revenue source for highway and mass-transit funding. The existing taxes, 18.4 cents a gallon for unleaded gasoline and 24.4 cents a gallon for diesel, have not been raised since 1993. The Commission’s recommendation will be to raise gas taxes by as much as 40 cents a gallon over five years.
Secretary Mary Peters, however, opposes raising gas taxes because it would result in higher pump prices for motorists. Peters instead plans to call for a greater reliance on private-sector investment and tolls.
New Jersey Governor Plans Increase is Highway Tolls
New Jersey Governor Jon Corzine proposes a plan to generate billions of dollars by increasing tolls. The proposed plan will increase tolls 50 percent in 2010, 2014, 2018, and 2022. After 2022, the tolls would increase every four years until 2085 to reflect inflation. In the next 10 years, the average toll would go from $1.20 to $5.85 on the turnpike, 35 cents to $1.60 on the parkway, and 50 cents to $2.40 on the expressway. The governor wants to use the money to pay off the $16 billion in state debt and fund other transportation projects. New Jersey is currently the fourth-most indebted state.
STATE LEGISLATION
Indiana House Bill 1269
Sponsored by Representative Niezgodski
This legislation aims to address employee classification in the construction industry. It provides that an individual performing services for a contractor is considered to be an employee of the contractor. The exceptions for this provision include meeting the requirements of the ABC test or meeting the requirements of being a legitimate sole proprietor or partnership. The Department of Labor (DOL) has authority to investigate the employment relationship between an individual and a contractor. Provides that a contractor or an agent of the contractor that intentionally fails to properly classify an individual as an employee commits a Class C misdemeanor, and that the second or subsequent intentional violation within five years is a Class D felony. This bill was introduced and referred to the House Committee on Labor and Employment on January 14, 2008.
http://www.multistate.com/IndependentContractors.nsf/billdetail?openform&billid=IN+H.B.+1269
Maryland House Bill 70
Sponsored by Representative Glenn
Prohibits construction industry employers from failing to properly classify an individual as an employee with the intent to evade payment of wages, benefits, taxes, or other contributions as required under certain provisions of State law. An individual who has not been properly classified as an employee may bring civil action for damages against the employers. The Commissioner can issue a stop-work order on any construction industry employer who fails to properly classify its workers. This bill was introduced and referred to the House Committee on Economic Matters on January 9, 2008.
http://www.multistate.com/IndependentContractors.nsf/billdetail?openform&billid=MD+H.B.+70
Missouri Senate Bill 929
Sponsored by Senator Green
This legislation aims to bar employers from misclassifying employees as independent contractors. The Department of Labor and Industrial Relations shall establish a complaint form to receive complaints about alleged misclassification of workers. If the department determines, after conducting a review, that an employer appears to have misclassified a worker, it shall forward its determination along with supporting documentation to the Attorney General. If a court determines that an employer has knowingly misclassified a worker, the court shall award penalties up to $100,000 to the Missouri worker protection fund. This bill was introduced on January 10, 2008.
http://www.senate.mo.gov/08info/pdf-bill/intro/SB929.pdf
Nebraska Legislative Bill 1016 (NEW)
Sponsored by Senator Lathrop
This legislation adopts the Proper Employee Classification Act. Under this legislation, to be considered an independent contractor, the individual must meet these conditions: (1) The individual has been and will continue to be free from control or direction, (2) The individual is engaged in an independently established business, (3) The individual can work for more than one company, (4) The individual furnishes all tools and equipment necessary, and (5) The employer does not represent the individual as an employee to customers. This bill was introduced and referred to the Committee on Business and Labor on January 18, 2008.
http://www.multistate.com/IndependentContractors.nsf/billdetail?openform&billid=NE+L.B.+1016
New Jersey Executive Order 96 (NEW)
Sponsored by Office of the Governor
This executive order creates the Governors Advisory Commission on Construction Industry Independent Contractor Reform. The Commission will be created to develop recommendations for addressing the problem of employee misclassification in the construction industry. This executive order was introduced on January 18, 2008.
http://www.multistate.com/IndependentContractors.nsf/billdetail?openform&billid=NJ+E.O.+96
Vermont House Bill 568
Sponsored by Representative Marcotte
Alters language in Title 21 modifying the treatment of independent contractors in the field of workers' compensation and unemployment insurance. This legislation gives conditions that a worker must demonstrate in order to be classified as an independent contractor by the employer. This bill was referred to the House Committee on Commerce on January 11, 2008.
http://www.multistate.com/IndependentContractors.nsf/billdetail?openform&billid=VT+H.B.+568
FEDERAL LEGISLATION
United States Senate Bill 2044
Sponsored by Senator Obama
The bill provides changes to the current classification of employees and independent contractors. It provides negatives changes to the IRS safe harbor provision as well as gives the Department of Labor authority to increase enforcement activities. Also encourages information sharing between the Department of Labor, Department of the Treasury, and state agencies. A number of influential Senate Democrats have cosponsored this harmful legislation. The bill was read twice and referred to the Committee on Finance on September 12, 2007.
http://thomas.loc.gov/cgi-bin/query/z?c110:S.2044:
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