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Coalition defends independent contractors

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There are many industries in which larger companies contract with independent workers or small companies to do work for them.

All those freelance workers could be forced to become "employees" of the companies they contract with if proposals continue to advance around the country, including one in Pennsylvania that targets the trucking industry.

Spreading awareness of the issue, the It's My Business Coalition says requiring independents to be classified as employees will hurt the economy by stifling entrepreneurship. The coalition, a group of businesses and industry groups, also argues that such measures will complicate business for both sides of the equation, including added taxes, unnecessary expenses and more paperwork.

"Business is already tough enough for small companies because of compliance," said Blanche Lincoln, the coalition's chairwoman and a former U.S. senator from Arkansas.

In Pennsylvania, one proposal caught the coalition's eye. State Rep. John Sabatina, a Philadelphia Democrat, wrote a co-sponsorship memorandum asking for support from colleagues for the re-introduction of House Bill 2540, which targets the classification of employees as independent contractors in the trucking industry, according to the memo.

It alleges intentional misclassification allows companies to dodge various federal workforce laws, such as the Americans with Disabilities Act, the Occupational Safety and Health Act and the Fair Labor Standards Act. Such companies also dodge unemployment compensation contributions, the memo says.

Multiple calls seeking comment from Sabatina were not returned.

The proposal — which hasn't advanced in the House — concerns groups in the trucking industry. They say it would needlessly complicate the employee-versus-independent issue and hurt small businesses.

"Owner-operators are an extremely important part of our industry," said Jim Runk, president and CEO of the Cumberland County-based Pennsylvania Motor Truck Association. "There are thousands, and they own their businesses."

In the world of the independent trucker, business comes from many different sources, he said. One day you could be hauling equipment for a large manufacturer, the next you're hauling groceries for a supermarket chain. Many independent truckers have contracts with multiple companies at the same time.

"That's the nature of that business," Runk said. "To suggest you're going to make (a trucker) an employee, well, of whom?"

The Owner-Operator Independent Drivers Association sees such measures as a roundabout way for states to increase tax revenue or for union allies to open more companies to organizing, said Norita Taylor, a spokeswoman for the Missouri-based group representing about 150,000 truckers and small companies in North America.

"Most of the trucking fleets are made up of small businesses," she said. "There are very sound business reasons why companies choose to use leased (owner-operators)."

More than 90 percent of all carriers have less than 20 trucks in their fleets and 78 percent of them have six or fewer, according to the association. One-truck carriers represent about half of all trucks. It's estimated these small businesses move 40 percent of the truck freight every year.

Whether or not someone is an employee or an independent isn't always clear cut. FedEx Ground Package System Inc., the package delivery company, is familiar with that. The Pittsburgh-based division of FedEx Corp. uses independent contractors exclusively for its pickup, delivery and transportation services.

"We support the It's My Business Coalition's efforts to preserve the right to choose small-business ownership," spokeswoman Erin Truxal said.

FedEx Ground contracts with more than 8,500 small businesses across its entire network, she said. In Pennsylvania, it uses 360 small businesses that employ more than 1,000 people.

"Each of these businesses is incorporated, registered and in good standing with the states in which they do business," Truxal said. "And all personnel who provide services under their agreements are treated and properly reported as their employees."

FedEx has had to defend its business model over the years. A July ruling in the U.S. District Court for Massachusetts held that former FedEx employees were misclassified.

"We disagreed with the ruling in Massachusetts, which is inconsistent with more than 100 state and federal rulings that have confirmed that FedEx Ground independent contractors are properly classified as such," Truxal said.

In 2009, FedEx faced similar challenges from the Teamsters union, which received majority votes for representation from workers at two Massachusetts terminals, according to the New York Times. The U.S. Court of Appeals for the District of Columbia ruled FedEx did not have to bargain with the Teamsters, overturning a decision by the National Labor Relations Board that the workers were employees.

FedEx Ground is planning a new facility in Dauphin County that will employ about 100 people.

Misclassification of employees as independents can be a serious issue, but it's usually vetted by auditors, Runk said. Introducing rules that force a one-size-fits-all policy would complicate matters and hurt businesses, he said.

"Our small business and independent contractors are the net creators of new jobs and business in our country right now," Lincoln said. "We need to uncomplicate their world."

By the numbers

Here are some independent contractor stats:

10.3 million — Estimated number of independent contractors in the U.S.

97 — Percent of independents accurately reporting income to IRS.

99 — Percent of employee-classified workers accurately reporting income.

$626 billion — Annual personal income for independents.

Source: It’s My Business Coalition

Jim T. Ryan

Jim T. Ryan

Jim T. Ryan covers Cumberland County, manufacturing, distribution, transportation and logistics. Have a tip or question for him? Email him at jimr@cpbj.com. Follow him on Twitter, @JimTRyanCPBJ.

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