MCAA Weekly Government Affairs Update: March 5, 2008
GOVERNMENT AFFAIRS NEWS
IRS to Take Closer Look at Misclassification
The Internal Revenue Service is going on the attack against firms that misclassify workers. It is unveiling an electronic matching system to identify firms that issues 1099s with payments of at least $25,000 to five or more workers who don’t have any other sources of earned income. The Service suspects that in such cases the contractors may be employees for tax purposes. According to The Kiplinger Washington Editors, Inc., businesses meeting these criteria will see employment tax audits in 2008. Please attend the Independent Contractor Summit on April 23, 2008 in Washington, D.C. to hear from the IRS directly.
Maryland Computer Tax
The State of Maryland, in a special session of the General Assembly late last year, imposed a 6% sales tax on computer services. Maryland lawmakers say the $200 million in tax revenue is needed to help the states budget shortfalls. Member courier companies typically are small businesses that purchase mission-critical computer services such as dispatch, communication, & POD software from vendors. Such a tax amounts to an unanticipated increase in the cost of doing business in Maryland. MCAA is tracking and attempting to influence legislation currently before the General Assembly with the goal to repeal or reduce this tax and the burden it places on Maryland member companies. There is a bill to repeal the tax in the House of Delegates and it has 72 sponsors. That's one more than the 71 votes needed to pass the bill in the House of Delegates.
Two U.S. Congressmen to Speak at Second MCAA Independent Contractor Summit – Registration is Now Open!
You are invited to attend the second Independent Contractor Summit on April 23, 2008 at the Madison Hotel in Washington, DC. Attendees will participate in both classroom style educational sessions and meetings on Capitol Hill with key Members of Congress.
The summit will consist of education and informational sessions with outside expert speakers and closed-door discussions amongst the sameday delivery industry in the morning. United States Congressman Dave Reichert (R-WA) will be speaking at the event. Congressman Reichert has been a strong supporter of the independent contractor business model and has great insight into the current situation. United States Congressman Tom Price (R-GA) will also speak at the summit. Congressman Price is a key member of the United States House Committee on Education and Labor. In 2007, this committee held two congressional committee hearings on the misclassification of independent contractors.
Art Sackler, MCAA’s federal government affairs lobbyist, a representative from the Internal Revenue Service, and MCAA leadership will also speak at the event. In addition to confirmed speakers, an invitation has been sent to the National Federation of Independent Businesses.
In the afternoon, attendees will have pre-scheduled meetings on Capitol Hill with their Members of Congress or appropriate legislative staff person. These meetings will focus on educating Congress on how the sameday delivery industry operates and the challenges it currently faces. After the Capitol Hill meetings have been completed, attendees will be free to leave. Breakfast, lunch, and roundtrip transportation to and from Capitol Hill will be provided.
MCAA members have been engaging their federal representatives at their district offices for more than six months. These positive results of the grassroots effort have allowed Members of Congress to better understand the sameday delivery industry.
The independent contractor business model continues to be under siege from state regulators, trial lawyers, and increasingly the federal government. In 2007, the United States House of Representatives held three committee hearings on the misclassification of independent contractors. In the same year, Senate Bill 2044 sponsored by U.S. Senator Barack Obama (D-IL) was introduced in the United States Senate. This legislation includes many negative changes, most notably, the elimination of the safe harbor provisions in the tax code for independent contractors.
Beginning with breakfast, the event will last from 7:30am ET to approximately 5:00pm ET. Hotel reservations can be made at the Madison Hotel ($229 a night) in Washington, D.C. by calling (202) 862-1600. The MCAA room rate code is MCA422. Please contact John Ferraro, MCAA Government Affairs Director, if you have any questions. A registration form is attached.
NEW LEGISLATION
Kentucky House Bill 654 (NEW)
Sponsored by Representatives Stumbo and Marzian
This legislation aims to stop the misclassification of employees as independent contractors. The Office of Workplace Standards is responsible for enforcing the classification provisions outlined in the bill. This office is required to share misclassification information with other state agencies. Administrative and civil penalties are also provided. This bill was introduced and referred to the House Committee on Labor and Industry on February 28, 2008.
http://www.multistate.com/IndependentContractors.nsf/billdetail?openform&billid=KY+H.B.+654
New Jersey Assembly Bill 2419 (NEW)
Sponsored by Representative Cohen
This legislation states that a licensed public accountant and an attorney at law will not be liable for damages for any professional advice given regarding the classification of an employee as an independent contractor. This bill was filed on February 28, 2008 but not assigned to a specific committee.
http://www.multistate.com/IndependentContractors.nsf/billdetail?openform&billid=NJ+A.B.+2419
Rhode Island House Bill 7907 (NEW)
Sponsored by Representative Corvese
This legislation attempts to end the practice of misclassifying employees as independent contractors. A worker will be considered an employee unless the individual can meet the requirements of the ABC test. The withholding of taxes will not be considered in the determination of an independent contractor. Penalties are provided ranging up to $5,000 for any offenses. This bill was introduced and referred to the House Committee on Labor on February 26, 2008.
http://www.multistate.com/IndependentContractors.nsf/billdetail?openform&billid=RI+H.B.+7907
Rhode Island House Bill 7908 (NEW)
Sponsored by Representative Diaz
This legislation aims to protect temporary employees from being misclassified as independent contractors. An individual is considered an employee unless the factors of the ABC test can be met. The employer is required to give the individual a written job description sheet outlining the duties, employment classification requirements, benefits, job hazards, and work schedule. This bill was introduced and referred to the House Committee on Labor on February 26, 2008.
http://www.multistate.com/IndependentContractors.nsf/billdetail?openform&billid=RI+H.B.+7908
UPDATED STATE LEGISLATION
Washington House Bill 3122 (UPDATED)
Sponsored by Representative Conway
This legislation was introduced due to the recommendation of the Joint Legislative Task Force on the Underground Economy in the Construction Industry. This task force was created due to enacted legislation in 2007. Washington State House Bill 3122 aims to consolidate and clarify the definition of an independent contractor for the purposes of workers’ compensation and unemployment compensation by creating a seven-part test. In addition to meeting the requirements of the ABC test for independent contractor determination, an individual must also be responsible for filing a schedule of expenses with the Internal Revenue Service, have a valid certification of registration with the Department of Revenue and other required state agencies, have a Unified Business Identifier number, and maintain a separate set of records. A substitute bill which narrowed the legislation by applying only to the construction industry was agreed upon. This bill passed the full House 92-2 on February 14, 2008. It is currently in the Senate Committee on Rules for a second reading.
http://www.multistate.com/IndependentContractors.nsf/billdetail?openform&billid=WA+H.B.+3122
OTHER STATE LEGISLATION
California Senate Bill 1490
Sponsored by Senator Padilla
This legislation states that it is the intent of the California Legislature to address the intentional misclassification of employees as independent contractors. Last year, Senator Padilla introduced Senate Bill 622, which provided harsh penalties for the “intentional” misclassification of independent contractors. Senate Bill 622 was eventually vetoed by the California Governor. This bill was introduced on February 21, 2008.
http://www.multistate.com/IndependentContractors.nsf/billdetail?openform&billid=CA+S.B.+1490
California Senate Bill 1583
Sponsored by Senator Corbett
This legislation would provide that a person who advises another person to treat an individual as an independent contractor to avoid employee status shall be jointly and severally liable with the employer if the individual is not found to be an independent contractor. An exemption is included for a licensed attorney who provides legal advice within the scope of his/her license. This bill was introduced on February 22, 2008.
http://www.multistate.com/IndependentContractors.nsf/billdetail?openform&billid=CA+S.B.+1583
Connecticut House Bill 5110
Sponsored by Joint Committee on Labor and Public Employees
This legislation clarifies that escort car operators are independent contractors for the purposes of unemployment compensation, workers' compensation and taxation as long as the individual remains free from control and owns their own vehicle. This bill was introduced and referred to the Joint Committee on Labor and Public Employees on February 13, 2008.
http://www.multistate.com/IndependentContractors.nsf/billdetail?openform&billid=CT+H.B.+5110
Connecticut Senate Bill 56
Sponsored by Joint Committee on Labor and Public Employees
This legislation establishes a joint enforcement commission on employee misclassification. It creates a task force to make recommendations to reduce employer's misclassification of employees for the purpose of avoiding paying benefits, fees and taxes. The first report will be published in February 2010. This bill was introduced and referred to the Joint Committee on Labor and Public Employees on February 13, 2008. A public hearing was held on February 28, 2008.
http://www.multistate.com/IndependentContractors.nsf/billdetail?openform&billid=CT+S.B.+56
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 has passed the full House and was referred to the Senate Committee on Pensions and Labor on February 4, 2008.
http://www.multistate.com/IndependentContractors.nsf/billdetail?openform&billid=IN+H.B.+1269
Iowa House Bill 692
Sponsored by Representative Hunter
This legislation requires employers to provide employees with meal and rest periods at specific times during the work day. Management or salary-paid employees are exempt from this requirement. An exemption can also occur if the employer can show that the ordinary nature and circumstance of the work prevents the employer from establishing a regular scheduled meal period. Civil penalties are provided. This bill was carried over from the 2007 Legislative Session. It is currently being examined by a Subcommittee within the House Committee on Labor.
http://www.multistate.com/IndependentContractors.nsf/billdetail?openform&billid=IA+H.B.+692
Minnesota House Bill 3296
Sponsored by Representative Johnson
This legislation states that the Commissioner of Employment and Economic Development shall conduct audits of trucking industry employers to determine if there is a pattern of improper classification of owner-operators as independent contractors. The Commissioner shall target audit companies that have been found by courts and regulators in other jurisdictions to have improperly classified owner-operators as independent contractors. This is the companion bill to Senate Bill 2688, which was introduced in the Senate. This bill was introduced and referred to the House Committee on Commerce and Labor on February 21, 2008.
http://www.multistate.com/IndependentContractors.nsf/billdetail?openform&billid=MN+H.B.+3296
Minnesota Senate Bill 2688
Sponsored by Senator Tomassoni
This legislation states that the Commissioner of Employment and Economic Development shall conduct audits of trucking industry employers to determine if there is a pattern of improper classification of owner-operators as independent contractors. The Commissioner shall target audit companies that have been found by courts and regulators in other jurisdictions to have improperly classified owner-operators as independent contractors. A companion bill, House Bill 3296, was introduced into the House. This bill was introduced and referred to the Senate Committee on Business, Industry, and Jobs on February 14, 2008.
http://www.multistate.com/IndependentContractors.nsf/billdetail?openform&billid=MN+S.B.+2688
Mississippi Senate Bill 3062
Sponsored by Senator King
This legislation allows independent contractors to have an increased deduction from their gross income equal to one half of the federal self-employment taxes imposed on such an individual for the taxable year. This bill was introduced and referred to the Senate Committee on Finance on February 13, 2008.
http://www.multistate.com/IndependentContractors.nsf/billdetail?openform&billid=MS+S.B.+3062
Missouri Senate Bill 929
Sponsored by Senator Green
This legislation aims to bar employers from misclassifying employees as independent contractors. Under this legislation, employers must submit federal IRS 1099 forms to the Department of Revenue. 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 $50,000 for first time offenders and $100,000 for repeat offenders to the Missouri worker protection fund. This bill was introduced on January 10, 2008. A committee substitute was agreed upon and passed out of the Senate Committee on Small Business, Insurance, and Industrial Relations on February 14, 2008. It has been placed on the calendar to be brought up on the Senate floor.
http://www.multistate.com/IndependentContractors.nsf/billdetail?openform&billid=MO+S.B.+929
Nebraska Legislative Bill 1016
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 referred to the Committee on Business and Labor. A public hearing was held on February 11, 2008.
http://www.multistate.com/IndependentContractors.nsf/billdetail?openform&billid=NE+L.B.+1016
New Jersey Executive Order 96
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
Rhode Island Senate Bill 2173
Sponsored by Senator Tassoni
This legislation requires independent contractors and subcontractors to maintain an apprentice training program before bidding on public works contracts. Independent contractors must also classify their workers as employees rather than independent contractors. This bill was introduced and referred to the Senate Committee on Labor on January 31, 2008.
http://www.rilin.state.ri.us//BillText08/SenateText08/S2173.pdf
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
Vermont House Bill 799
Sponsored by Representative Kitzmiller
This legislation aims to limit the misclassification of employees by creating a series of factors that must be met in order to be classified as an independent contractor. The bill was introduced on February 1, 2008.
http://www.multistate.com/IndependentContractors.nsf/billdetail?openform&billid=VT+H.B.+799
Vermont House Bill 802
Sponsored by Representative Kitzmiller
This legislation aims to reduce the misclassification of employees. It gives authorization to the Departments of Labor, Banking, Insurance, Securities, and Heath Care Administration to collaborate to adopt rules to address the practice. At a minimum, increased coordination, enforcement, and information sharing agreements should be established. The bill was introduced on February 1, 2008.
http://www.multistate.com/IndependentContractors.nsf/billdetail?openform&billid=VT+H.B.+802
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 would eliminate “safe harbor” provisions in the tax code for independent contractors 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:
If you notice any one piece of legislation in your area that needs special attention or if you are aware of any local action being taken on specific legislation, please contact MCAA Government Affairs Director John Ferraro at 202-207-1121. This way we can ensure a well coordinated effort on behalf of the courier industry. We hope you enjoy this service, please feel free to contact me if you have any questions, comments, or suggestions. Thank you very much.
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