Bill to Reform Independent Contracting

Rep. Jerry Kleczka (D-Wis.) has introduced a bill that trucking officials fear could make it more difficult to classify owner-operators as independent contractors.

The Independent Contractor Clarification Act would replace the 20-factor common law criteria that employers now use to classify workers with a three-factor test.

Under the proposal, a person would be classified as a

ontractor if:

ul>

The employer does not control the manner in which the individual completes assigned tasks.

LI>The individual may solicit and undertake other business opportunities.

LI> The individual encounters entrepreneurial risk.

ichael J. Chakarun, vice president of tax and economic policy for American Trucking Associations, said the main concern about the proposal is the solicitation requirement. Many truck owner-operator are leased exclusively to a single carrier.

Kleczka said a change is needed to eliminate "misclassification" of workers, which denies individuals benefits such as health coverage, a retirement plan or the employer's share of withholding taxes.

The bill would repeal Section 530, a provision in the 1978 tax bill that allowed employers to treat a worker as an independent contractor for employment tax purposes if the employer had a "reasonable basis," such as a prior audit by the Internal Revenue Service, a private letter ruling from the tax agency or reliance on a long-standing recognized industry practice.

Employers now eligible for Section 530 would keep the so-called safe harbor protections until 2003 or until the IRS issues new guidelines, according to the proposal.

In addition, if an employer is forced to reclassify workers before 2003, the employer will not be held liable for back taxes.