MCAA Weekly Government Affairs Update

April 16, 2008 April 9, 2008 April 2, 2008 March 26, 2008 March 19, 2008 March 12, 2008 March 5, 2008 February 27, 2008 February 20, 2008 February 13, 2008 February 6, 2008 January 30, 2008 January 23, 2008 January 16, 2008 January 9, 2008 January 2, 2008

The MCAA Government Affairs Update is emailed to the association membership on a weekly basis. This informative newsletter contains information on state and federal legislation that impacts the sameday delivery industry. Also, included are government affairs news and other actions the MCAA Government Affairs Team is taking on behalf of the membership. To receive this weekly newsletter and other legislative action alert emails, please contact John Ferraro at 202-207-1121 to join the MCAA.

April 30, 2008

GOVERNMENT AFFAIRS NEWS

MCAA Meets with 75 Congressional Offices at Independent Contractor Summit
MCAA members from all over the country descended on Washington, D.C. for the second Independent Contractor Summit on April 23, 2008. Attendees participated in a packed one day event that consisted of excellent expert speakers and a full afternoon of meetings on Capitol Hill.

The summit began at the Madison Hotel with Rob Slack, MCAA President, recounting how far the MCAA has come in developing its government affairs programs. United States Congressman Dave Reichert (R-WA) shared his past experiences as a county sheriff and his battles for funding with county officials to demonstrate the importance of persistence and determination.

Following Congressman Reichert was Mike Rusnak, former IRS trial lawyer, who was able to give his insights into possible future IRS enforcement activities. He also gave a very informative summary of the IRS Section 530 safe harbor provision. Bill Rys, Tax Counsel for the NFIB, gave the political outlook of two pending pieces of legislation in Congress that would repeal the safe harbor.

Next on the agenda was Art Sackler, MCAA's federal affairs lobbyist, who gave each attendee the tools they needed to have successful meetings on Capitol Hill. The final speaker of the summit was United States Congressman Tom Price (R-GA) who had a tremendous amount of knowledge on the independent contractor issue and the ongoing debate in Congress. The Congressman gave a very motivational speech and highlighted the importance of building relationships with Members of Congress.

Summit attendees had a working lunch to discuss where the MCAA should focus its efforts and resources in the future. The group consensus was that increased attention needs to be given to the federal level but also additional resources are needed to build the state courier associations so they can quickly deal with local issues as they arise.

The summit highlight was the trip to Capitol Hill to meet with 75 Members of Congress and their legislative staffs. Throughout the afternoon MCAA members went to each office explaining the vital importance of the courier industry and sharing success stories of just in time deliveries. The two harmful pieces of legislation were also discussed with extra emphasis on why they would be so detrimental to the courier industry. The overwhelming response was extremely positive with each congressional office wanting to work with courier industry leaders in the future.  

U.S. Congressman Introduces Legislation Repealing IRS Section 530
United States Congressman Jim McDermott (D-WA) has sponsored H.R. 5804 which aims to ensure that employees are not incorrectly classified as independent contractors. Section 6041 of the Internal Revenue Code is amended to require that payments made by a business to a corporation for services that exceed an annual value of $600 will be reported to the IRS.

The legislation requires Section 530 of the Revenue Act of 1978 to be repealed and replaced with a safe harbor that will provide clear guidelines by the IRS to taxpayers for classification purposes.

In order to qualify for the safe harbor created in this bill, taxpayers would need one of the following: (1) a written determination from the Department of Treasury that the worker is not considered an employee; (2) the IRS conducting an examination of the worker and not determining that the worker was an employee; and (3) receiving a letter ruling or an examination that was completed up to seven years prior to the tax period in question.

As with Section 530, this legislation requires that taxpayers must have consistently treated workers as independent contractors in order to qualify for the safe harbor. The Department of the Treasury may issue public guidance to help taxpayers properly classify workers, and puts the burden of proof on the taxpayer to provide evidence that it qualifies for the newly constructed safe harbor.

Workers are given the ability to petition the IRS for a review of their classification status. Requires the Secretary of the Treasury to provide Congress with annual reports detailing the extent to which misclassification occurs, and how it impacts workers and the collection of revenue. Increases the penalties imposed on taxpayers for failing to adequately file information returns required in the Internal Revenue Code.

UPDATED STATE LEGISLATION

California Senate Bill 1583 (UPDATED)
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 sent to the Senate Committee on Judiciary on March 6, 2008. A public hearing was held on April 8, 2008. Even though business groups demonstrated their opposition at the hearing, the bill passed the Committee along party line votes. The bill was sent to the Senate Committee on Appropriations. A public hearing is set for May 5, 2008 at 10:00am in Room 4203.

Connecticut Senate Bill 56 (UPDATED)
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 has passed the Senate and been referred to the House Committee on Judiciary on April 22, 2008.
http://www.multistate.com/IndependentContractors.nsf/billdetail?openform&billid=CT+S.B.+56

Tennessee House Bill 1323 (UPDATED)
Sponsored by Representative West
This legislation requires employers to report to department of human services certain identifying information regarding employment of subcontractors and independent contractors. The bill was introduced and referred to Committee on Children and Family Affairs in February 2007. The Subcommittee recommended the bill be passed, referred back to full Committee on Children and Family Justice in March 2007. Action has been deferred in Committee on Children and Family Affairs until 2008. The bill has been placed on the Regular Calendar for May 1, 2008.
http://www.multistate.com/IndependentContractors.nsf/billdetail?openform&billid=TN+H.B.+132

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. Under new amendments to this bill, the employer must provide each independent contractor with a form outlining the impact that the individual's status as an independent contractor has on their tax obligations and eligibility for employment protections, and a notice that the individual may request a written determination from the EDD as to whether they are an independent contractor or employee. The EDD is required to develop a similar form to distribute to all independent contractors as well. The bill would also require the EDD to process a request for a written determination regarding the employment status of an individual hired as an independent contractor, and to take all steps reasonably necessary to carry out the other duties described in this legislation. This bill was sent to the Senate Committee on Rules on March 6, 2008. This bill has been amended and re-referred to the Senate Committee on Labor and Industrial Relations on April 3, 2008. A public hearing was held on April 9, 2008. Labor unions were in support of the bill and it passed the Committee along party lines votes. A public hearing is being scheduled for April 10, 2008 before the Committee on Appropriations.
http://www.multistate.com/IndependentContractors.nsf/billdetail?openform&billid=CA+S.B.+1490

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

Kentucky House Bill 654
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. Reported favorably out of the House Committee on Labor and Industry and sent to the House Committee on Rules on March 7, 2008. It passed the full House by an 89-7 vote on March 13, 2008 and was sent to the Senate. Assigned to Senate Committee on Licensing, Occupations and Administrative Regulations on April 1, 2008.
http://www.multistate.com/IndependentContractors.nsf/billdetail?openform&billid=KY+H.B.+654

Kentucky Senate Bill 256
Sponsored by Senator Jones
This legislation aims to prohibit misclassification of employees as independent contractors in the construction industry. It requires the Office of Workplace Standards to post explanatory documents outlining law at each worksite. Records are required to be retained for three years. The Office of Workplace Standards is responsible to enforce the provisions. This bill was introduced on March 6, 2008.
http://www.multistate.com/IndependentContractors.nsf/billdetail?openform&billid=KY+S.B.+256

Massachusetts House Bill 311
Sponsored by Representative Rodrigues
This legislation provides technical changes to the independent contractor definition. As currently written, individuals would only have to meet two parts of the three part ABC test. This bill was introduced and the Joint Committee on Consumer Protection and Professional Licensure held a hearing on the issue in 2007. On March 18, 2008, the Committee recommended the legislation be passed. MCAA continues to work with other organizations in the Massachusetts Independent Contractor Coalition to ensure this legislations passage.
http://www.multistate.com/IndependentContractors.nsf/billdetail?openform&billid=MA+H.B.+311

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. Amendments have been adopted to apply this legislation only to the construction industry.
http://www.multistate.com/IndependentContractors.nsf/billdetail?openform&billid=NE+L.B.+1016

New Jersey Assembly Bill 2419
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

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

New York Senate Bill 7235
Sponsored by Senator Robach
This legislation establishes a task force to study employment classification and misclassification. The task force shall hold regional public hearings and roundtable discussions to gather information. The bill was introduced on March 21, 2008.
http://www.multistate.com/IndependentContractors.nsf/billdetail?openform&billid=NY+S.B.+7235

Pennsylvania House Bill 2400
Sponsored by Representative Lentz
This legislation establishes the Employee Misclassification Prevention Act by aiming to identify employers who improperly classify their employees as independent contractors. Under this legislation, an individual shall be considered an employee of the party that pays the wages unless it is shown that (1) the individual is free from direction and control, (2) the service is outside the usual course of the employer’s business, and (3) the individual is engaged in an independently established trade or business. The failure to withhold income tax, pay unemployment compensation, or workers’ compensation premiums shall not be considered in making a determination. An employer, or an officer or agent of the employer, that knowingly misclassifies commits a third degree felony which is punishable by 3.5 years in prison for the first offense. Unintentional misclassification can lead to six months in prison. This bill was introduced and referred to the House Committee on Labor Relations on April 3, 2008.
http://www.multistate.com/IndependentContractors.nsf/billdetail?openform&billid=PA+H.B.+2400

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 House Bill 5804
Sponsored by Congressman Jim McDermott (D-WA)
This legislation would repeal the Section 530 safe harbor provision in the IRS tax code. The burden of proof is shifted to the taxpayer to provide evidence of proper worker classification. It also requires payments made by a business to a corporation for services that exceed an annual value of $600 will be reported to the IRS. Secretary of the Treasury must also provide Congress with annual reports detailing the extent to which misclassification occurs, and how it impacts workers and the collection of revenue. There are currently 26 cosponsors to this legislation. The bill was referred to the Committee on Ways and Means on April 15, 2008.
http://thomas.loc.gov/cgi-bin/query/z?c110:H.R.5804:

United States Senate Bill 2044
Sponsored by Senator Obama (D-IL)
The legislation 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.