S. 2044: Obama weighs in on independent contractors

February 25th, 2008 by

The fact that a U. S. Senator has filed a bill on independent contractors is not a major news item. But the senator is Barack Obama, and the bill, S. 2044, is entitled “Independent Contractor Proper Classification Act.” Obama has zeroed in on an issue of abiding interest to the Insider – and to all who deal with employment issues on a daily basis. (Search this site for our many postings.)
Obama’s bill would amend the Revenue Act of 1978 in three key areas:
1. Requires employers to treat workers misclassified as independent contractors as employees for employment tax purposes;
2. Repeals a ban on Treasury regulations or revenue rulings on employee/independent contractor classification issues; and
3. Eliminates the defense of “industry practice” as a justification for misclassifying workers as independent contractors.
The bill enables workers to petition the Treasury Secretary for clarification of their status. It prohibits employer retaliation against any workers filing these petitions. Language describing the petition process would be added to required workplace postings regarding employment rights. Finally, the bill requires any employer hiring an “independent contractor” to provide the following notice to the individual:

Each employer shall notify any individual who is hired…as an independent contractor…of the Federal tax obligations of an independent contractor, the labor and employment law protections that do not apply to independent contractors, and the right of such independent contractors to seek a status determinations from the IRS.

The FedEx Factor
Obama’s bill may well languish in committee. But to the degree it reveals the presidential candidate’s thinking, it is significant. I imagine that FedEx is paying close attention: the embattled delivery behemoth is fighting – and losing – a state-by-state defense of its hiring practices. Those ubiquitous “independent contractor” drivers, in their cool FedEx trucks and natty FedEx uniforms, are looking more like employees every passing day. If S. 2044 becomes law, or if Obama’s quest for the presidency succeeds, FedEx will probably have to throw in the towel. In the meantime, FedEx is undoubtedly writing a few hefty checks to a candidate whose name rhymes with “pain.”