There are at least three different US government departments that test employment relationships to see whether an individual is an IC or employee. The IRS, the US Department of Labor (USDOL) and the National Labour Relations Board (NLRB).
I do know that in February of this year, Senator Bond (R.-State) introduced S-344, also known as the "Independent Contractor Simplification and Relief Act of 1999" (for IRS classifications) into Senate. As far as I know even company owners DONāT expect this bill to pass.
It would make it easier for companies to class employees as IC's without satisfying the traditional tests of employment. As an IC you lose a lot and all it does is shift some employment expenses and taxes from companies to employees. For example as an employee you pay about 7%-8% payroll taxes (FICA and FUTA). If you are re-classed as an IC you would be forced to pay the employer's share as well (about 15% in total.)
That's why messenger companies that classify employees as IC's should be challenged. Call the IRS and the USDOL. They do audits of companies and recover large wads of cash from companies that disguise their employees. It's also why the International Labour Organization is trying to develop a convention on contract labour and eliminate disguised employment.
Also IC's may still be allowed to join unions. In August 1998, the NLRB ruled that IC's at Roadway Package Systems were employees for the purposes of the National Labour Relations Act and they were allowed the opportunity to join a union. So don't let so-called IC status stop you.
There are a couple of important points:
The IRS makes a form called the SS-8 (here in Adobe Acrobat format) which is used to determine employee status. Go fill one out and see how you stack up. Supposedly once this form is processed and it is determined that you ARE in fact an employee, everyone who has worked at that company is entitled retroactively to reimbursement.
For Canadians, Revenue Canada has a similar form entitled "Request for a ruling as to the status of a worker under the Canada Pension Plan or Employment Insurance Act" (CPT2). Once you fill it out your employer will be required to remit both their share and your share of CPP and EI premiums and you will be eligible for employment insurance if you become unemployed. You will also gain contributions to your Canada Pension. Dependent contractors are considered employees under Revenue Canada. If you receive 50% or more of your work from one company you are at least a dependent contractor and you are still entitled to the same deductions as an independent contractor for income tax purposes.
Revenue Canada also publishes a guide called "Employee or Self-employed?" which describes how they determine employment status.
NICA claims to be "an alliance made up of Independent Contractors" but they clearly represent the companies' interests. According to NICA, all they do is go through the IRS's 20 questions to make sure that companies don't misclassify workers as IC's and then get hit by the IRS for it.
NICA takes over responsibilty for paying the IC's. In exchange for losing all your protections under employment standards, IC's get to pay NICA a fee of $19.75 per week. Using NICA's own (flawed and misleading) numbers here is how a bike messenger IC is supposed to benefit:
Gross Annual Income :$25,000
Mileage : (oops doesn't apply to bikers)
NICA dues : $975 (I wonder how that compares to union dues)
Pager and radio : $416 (this is really low. We get charged about $25 per week at many companies in TO - also isn't it illegal to charge employees for radios in CA? I guess this is another IC only charge.)
Parking and tolls : $0 for bikers
Interest on vehicle loan : $0 for bikers
AAA membership : $0 for bikers
Maps and flashlights? : $50
Office supplies : 50
Bike expenses : $1,500 (my estimate)
Total Deductions : $2,991
Tax benefit@15% : $449
So for the priviledge of paying $975 and being charged at least $416 for radio you get a $449 tax break. That's a loss of at least $942 to the messenger.
Now on NICA's site they note that companies gain by not having to pay the FICA matching at 7.65%. Well guess who picks up this charge and what do you know NICA forgot to include it in their calculation for the IC's.
So in addition to the $942 loss to messengers, you lose an additional $1,912 for a total of $2,854. IT COSTS A BIKE MESSENGER $2,854 TO BE CLASSIFIED AS AN IC.
In fact most of the gain of $618,250 that NICA claims for companies comes out of messengers pockets. Governments aren't stupid. If they don't collect from the owners they collect from the workers.
In addition you lose employment standards protection and you lose Workers Comp but you are now responsible for paying your own taxes.
The private insurance NICA has is just that - private. It is not legislated and they can end it or change it whenever they want. And the $19.75 weekly charge - how much do you think this will go up by in the future? Once NICA has control of the industry messengers will see all kinds of new charges and a reduction in their insurance payouts.
Why? Beacuse the "National Indepependent Contractors Association" doesn't represent IC's it represent owners. An organization that represents workers is a BMA or a union. I wouldn't want my BMA run by the very owners whose behaviour created a need for the BMA in the first place.
IC's exist all over the US and Canada. We can all tell you what the real deal is.
NICA IS FRAUD - plain and simple. And it emphasizes the fear that the union has put in the owners.
One last point. Here in Toronto we are responsible for paying our own taxes. Many couriers have fallen behind and must pay penalties and interest. I think most people understand that it can be difficult to make quarterly payments when your faced with the messenger industry problems. Because some messengers are behind they are less likely to stand up for their rights. They don't want to be hassled or targeted by the government.
IC's have a harder time enforcing their rights.
If you're gonna lose all your rights and you're gonna be self-employed, then BE SELF-EMPLOYED. Start your own company. Why should you pay NICA for anything?
For years the messenger industry arbitrarily and often illegally mis-classified their employees independent contractors. This is the primary reason for the low tag rates in the industry.
Many messengers like the IC classification but if you're going to be classified as an IC why not demand to be treated like an IC. Why put up with being classified as an IC and being treated like an employee giving up all your legally protected rights.
So straight from the MCAA's Annual Meeting here is what their own legal advisors recommend for treatment of IC's.
Unfortunately the MCAA has thoughtlessly chosen board member Robert Wyatt to act as the point man on IC issues. Wyatt is the former owner of Orbit Lightspeed who among other things threatened to kill one of his messengers and firing others for organizing a union vote.
http://www.nlrb.gov/weeklysum/w2578.html#7
and full text here
(Reprinted from Messenger Courier World Magazine Fall 2002):
Independent Contractor DOs & DON'Ts
Howard Ross and Bert Bisgyer made a presentation at our recent MCAA Annual Meeting concerning the legal aspects of classifying workers as independent contractors ("ICs") or employees. If you didn't have the opportunity to pick up a copy of their materials, we have reprinted their summary of basic dos and don'ts that are designed to support IC status*
DO's
Give the IC the right to control the manner and means of performing his work.
Permit the independent contractor to "bid" for a particular route, or a particular time slot for on-demand deliveries.
Allow the contractor to work the hours he chooses.
Allow the contractor to pick and choose the jobs he wishes to take.
Pay the contractor by the job (i.e. for each trip billed).
Allow the contractor to hire, and pay for, his or her own assistants.
Allow the contractor to "hand off" work as he deems appropriate (consistent with other requirements under his independent contractor agreement).
Supply new contractors with a brief orientation, different from a regular employee's orientation.
Enter into (and abide by) an appropriate written independent contractor agreement, either with the contractor directly, or with a third party which will be supplying suitable contractors.
File all required 1099 forms.
Follow the industry standard in the competing marketplace (if you don't, your competitors will report you!).
DON'Ts
Mandate specific hours, prescribe a minimum number of work hours, or other-wise fix the driver's work schedule.
Pay by the hour, week or month.
Pay business or travel expenses, including uniforms, vehicle or bike repairs, radios, pagers or cell phones (it is usually alright to deduct these expenses from the contractor's "settlement checks").
Provide vehicles, bicycles, or business equipment.
Provide company employees to assist in the performance of the contractor's job.
Require elaborate training; do not specify specific details as to how deliveries are to be made (see pages 4-5 of the handout from the MCAA presentation).
Make a promise of employment status;identify the independent contractor as a company employee; make the independent contractor subject to the company's employment policies or company handbook.
Permit independent contractors to qualify for company fringe benefits.
Mandate uniforms (unless required by the customer).
Have the independent contractor report to the company's base office; entitle the independent contractor to use admittance card or keys to the company's principal place of business, or utilize company equipment, supplies, etc.
Terminate without "cause" (the contractor must be obligated to perform his job according to specifications set forth in the written contract, and termination is available only if the contract terms are breached).
Include non-competition clauses (confidentiality clauses, and a prohibition against solicitation of customers is usually alright).
Require elaborate oral or written reports, but rather "service advisories" designed to achieve greater customer satisfaction.
(This is also reprinted from Messenger Courier World Magazine Fall 2002)
By decision dated June 11,2002, the U.S. Court of Appeals for the District of Columbia upheld an order of the National Labor Relations Board which held that owner operator drivers were employees and not independent contractors.
In prior cases, the Court had treated "the amount of control that the Company has over the way in which the worker performs his job" as the most impor-tant among several elements used in distinguishing an employee from an independent contractor.
In a 1978 case, this Court ruled that owners of tractors used to haul a cartage company's trailers were ICs primarily because the company did not control the "means and manner" of their work; the company in that case did not concern itself with the owner operator's hours, attire, routes, break times, type of vehicle or vehicle maintenance. In that case, the Court had emphasized the driver's freedom to "reload the freight and deliver it in the order they find most efficient" and concluded that "it is really the driver, not the company, who ultimately determines the order in which he will make deliveries"
In the Corporate Express case decided on June 11, 2002, the owner operators "could not deviate from the order of stops set out on the route sheet".
Corporate Express also required the owner operators to carry pagers so that they could be reached at all times, and to call in frequently for scheduling changes and updates. The U.S. Court of Appeals for the District of Columbia upheld as reasonable the NLRB's decision to focus not upon the employers' control of the means and manner of the work, but instead upon whether the supposed ICs have a "significant entrepreneurial opportunity for gain or loss".
Since the NLRB found that Corporate Express' owners operators were not permitted to employ others to do the company's work, or to use their own vehicles for other jobs, the owner operators lacked all entrepreneurial opportunity and consequently func-tioned as employees rather than as ICs. In sum, the ICS must truly take some economic risk and have the opportunity to profit from working smarter, not just harder.