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Obama to re-visit 'misclassification' legislation
21.11.08 by Buffalo Bill

S’funny, the other day I was looking at this story from almost exactly a year ago in which I wrote that

in the US, legislation has been introduced that could, if enacted, fundamentally change the relationship between courier companies and their operators. The legislation is entitled the Obama-Durbin Independent Contractor Proper Classification Act of 2007. Around 10 million people are estimated to be classified as ‘independent contractors’ rather than ‘employees’ in the US, and the legislation is being introduced to close what is perceived to be a loop-hole which allows employers to ‘misclassify’ as ICs operatives that would otherwise be considered employees, thus saving the employers the money they would normally be forced to spend on benefits such as statutory holiday pay, equipment and so forth.

The legislation wasn’t enacted, but it seems that the incoming President is considering re-introducing the bill, according to this article a

…bolstered Democratic majority and the incoming Obama administration might be poised to rewrite a 30-year-old law critics say lets companies skirt billions of dollars in taxes, while depriving workers of benefits like overtime pay, family and medical leave and the right to join a union.

President-elect Obama introduced a bill last fall to crack down on companies’ ability to classify workers as independent contractors rather than employees. The IRS for years has tried to claw back revenues from companies they say have “misclassified” workers as contractors, which can save employers up to 30 percent on payroll taxes. Estimates of federal revenue loss attributed to worker misclassification have ranged as high as $4.7 billion a year.

The Obama bill would amend the 1978 law that protects the tax status of companies employing independent contractors by removing an exemption for firms that designate workers as such based on long-standing practice in that industry. Critics argue that standard is too easy to meet, and a Joint Committee on Taxation report last year said the law is ‘construed liberally in favor of taxpayers.’

The bill also would enable the IRS to determine if workers should be “reclassified” as employees; allow the agency to write regulations on how workers should be classified, and require companies to notify contractors of their right to seek a determination of whether they should be designated employees. ‘Every day, millions of Americans go to work and play by the rules, teaching our children the values of hard work and responsibility,’ Obama said in a statement when the bill was introduced. ‘And most employers treat their workers fairly, paying them a decent wage and providing the benefits they deserve. But we must fix the system to stop those few employers from breaking the rules and exploiting this tax loophole at the expense of taxpayers and our workers’ safety and security.’

Again looking back at stuff I wrote this time last year, it must have been quiet last November too, because I asked ‘will I ever get another job ever again?’, in which I recalled the slow death that is standing-by on a slow day. Back then it seemed just like a normal dip in work that would soon be followed by a bump. Right now, it’s pretty clear that everyone is spending less, and it is particularly noticeable in our business.

I rode through the last big recession, and if this one is anything like the last one, we can expect to see price-cutting by courier companies desperate to boost the number of clients, and this will be followed, inevitably, by bankruptcy for some, normally because a big account goes bust without paying their courier bill. When a courier company goes bankrupt, or is at risk of going bankrupt, there is very little of consequence to be sold to meet the creditors’ demands. The only thing worth having is the client list, and the office staff will almost certainly be surplus to requirements. The riders are slightly less expendable, especially if the soon-to-be-bankrupt company is bought by another courier company.

But if the company that you ride for goes bust, or gets bought, it needn’t be a disaster. Most of the big accounts will be looking for both continuity and the opportunity to make some savings. Which is where a group of riders who used to work for their old courier company could come in and say, well, we can provide the same service as Desperate Despatch used to, but we can do it cheaper than Mega-Corp Couriers, who are now supplying your courier service. You might be surprised by how receptive the accounts are to such an approach, and how much better off you would be.

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