MCAA Weekly Government Affairs Update: January 9, 2008
GOVERNMENT AFFAIRS NEWS
Advisory on Independent Contractor Statute
Massachusetts Attorney General Martha Coakley has requested comments on a proposed advisory on the independent contractor statute. The Independent Contractor Consulting Group has decided to draft comments to be submitted to the Attorney General. The MCAA has been active members of this coalition for many years.
In reviewing situations for misclassification, the Attorney General considers some factors to be strong indications of misclassification that warrant further investigation and may result in enforcement. These include:
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Individuals providing services for an employer that are not reflected on the employer’s business records.
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Individuals providing services who are paid “off the books”, “under the table”, in cash or provided no documents reflecting payment.
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Insufficient or no workers’ compensation coverage exists.
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Individuals providing services are not provided 1099s or W-2s.
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Independent contractors performing similar or identical services as employees of the same entity.
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Contracting entity providing equipment, tools and supplies to independent contractors or requiring the purchase of such materials directly from the contracting entity.
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Alleged independent contractors not paying income taxes or into the Unemployment Compensation Fund.
To view the new advisory, click here:
http://www.mass.gov/?pageID=cagosubtopic&L=3&L0=Home&
L1=Workplace+Rights&L2=Independent+Contractor+-+Proposed+New+Advisory&sid=Cago
Independent Contractor Misclassification is on the 2008 Agenda
The Chairman of the Indiana House Committee on Labor and Employment plans to pursue an ambitious series of initiatives which he feels protects the rights of workers. One initiative would be to penalize employers who classify workers as independent contractors.
State Representative David Niezgodski (D-South Bend) said, “When an employee is classified as an independent contractor, their employers are able to avoid paying normal payrolls. This means they don’t have to pay Social Security or Medicare, overtime, worker’s compensation and unemployment insurance.” He went on to say, “Employers are using this tactic to avoid their legal obligations, just to save themselves money.”
“As a result, many of these workers are forced to pay all of these taxes on their own through a salary that is already low to begin with,” Niezgodski noted. “It also invites the possibility that out-of-state workers and illegal aliens can take jobs away from Hoosiers. This isn’t a roadmap to success. It’s a recipe for failure.”
Independent contractor misclassification legislation was introduced in Indiana last session but never made it out of committee. The MCAA will pay close attention to any possible legislation this session and work to gain a similar result.
Motor Carrier Exemption
MCAA continues to work with the Motor Carrier Exemption coalition to restore the overtime exemption under the Fair Labor Standards Act. The Motor Carrier Exemption provision was not ultimately included in House passed Department of Transportation technical corrections legislation. There will hopefully be a renewed effort on behalf of the coalition once the United States Congress returns to session after the winter recess. It still remains important for MCAA members, especially those operating in Minnesota, to contact Congressman James Oberstar (D- Minnesota) at 202-225-6211 and urge him to restore the exemption.
New Internal Revenue Service Forms
The new I-9 Employee Eligibility form is now in effect. The federal government requires all companies to complete the form for every employee within the first three days of employment and to retain that form for either one year after termination of employment or three years, whichever is longer. Current employees do not need to complete this form unless re-verification is required. There is a fine of up to $1,100 for non-compliance.
The Form 8919, Uncollected Social Security and Medicare Tax on Wages, has been developed for employees who feel they have been misclassified as independent contractors by an employer. The form will be used to figure and report the employee’s share of uncollected social security and Medicare taxes due on their compensation.
Maryland Tax on Computer Services
The Maryland General Assembly in its recent Special Session, passed Senate Bill 2, which includes a special 6% tax on the purchase of computer services. “Computer services” is broadly defined to include web design, computer facilities management, custom computer programming, data processing, storage & recovery, as well as hardware or software installation, maintenance & repair. It appears that even when such computer services are purchases from out-of-state providers, Maryland companies will still be required to report the taxes they owe and pay this tax.
This tax has a direct impact on many courier companies since they are mostly small businesses without the resources to employ in-house computer or software engineers. Companies in the courier industry also rely heavily upon computer software to communicate with drivers and customers. Computer software also enables customers to track the location of their parcels and the progress of their deliveries. This tax will have a negative affect on small businesses ability to continue to compete with larger companies such as FedEx and UPS.
MCAA will work with our courier members in the state as well as the Maryland Chamber of Commerce as they work for the repeal of this tax.
FEDERAL LEGISLATION
United States Senate Bill 2044
Sponsored by Senator Obama (D)
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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