Opinion: Assault on Independents Threatens Trucking
By J.R. Gonzales
Founding Chairman
Coalition for Independent Contractor Freedom
This Opinion piece appears in the Jan. 12 print edition of Transport Topics. Click here to subscribe today.
If you wanted to shore up a beleaguered industry, would you do it by creating a new threat? Of course not, but that’s exactly what some U.S. policymakers seem ready to do to the already devastated U.S. trucking industry.
Trucking companies already face the massive twin challenges of volatile energy prices and a global recession. While energy prices have eased in recent weeks, there are no guarantees that they won’t surge again. Worse, the severe economic pullback is a massive blow to truckers. When production and consumption grind to a halt, so does transportation.
Under those circumstances, you might expect government to take steps to strengthen the trucking industry’s efficiency and effective operations. Instead, federal and state governments are doing the exact opposite — putting the industry’s viability at risk.
The problem is the government’s treatment of independent owner-operators. These independent contractors are vital to the industry. The trucking and delivery industry relies on more than 300,000 independent contractors and owner-operators — almost 10% of its workforce. Independent contractors and owner-operators provide cost-efficiency and “surge capacity” to the industry and its customers — drivers and trucks available on flexible schedules to meet rapidly changing demand.
For truckers, working as owner-operators is a time-honored tradition and a practical way to find work quickly (especially after layoffs), balance work and home life, volunteer to work longer hours in order to boost income and build equity by owning a business.
For trucking companies, independent contracting means the ability to add or cut capacity to cope with volatile conditions in manufacturing, retailing and the other industries they serve. And many larger trucking companies started out as an independent owner-operator’s small business.
Ignoring all this, policymakers have declared war on independent contracting. At a time when they should focus on competitiveness, job creation and driving the growth of key industries, officials are, instead, taking actions that could cripple those industries — and American workers — through a misguided series of actions that force companies to turn away from independent contractors and instead carry the burden — which is mandatory — of full-time employees.
Some of the policymakers’ actions — which compel employers to “reclassify” their contractors as full-time employees — seem intended to protect workers. But they are likely to have the opposite effect.
The attack on independent contracting takes several forms. The Internal Revenue Service is on a sustained drive to force companies that use independent contractors to turn them into employees. In 2007, the IRS undertook a “worker misclassification” program aimed at forcing companies to “reclassify” independent contractors as employees and entered into data-sharing agreements with more than 25 states.
Worker classification enforcement is now the largest single tax enforcement program — 30% of 2008 IRS audits are earmarked for “worker misclassification” investigations. A number of states have passed their own “worker misclassification” laws, among them Arizona, Delaware, Illinois, Massachusetts, Michigan, New Jersey, New Mexico, Oregon and Pennsylvania.
At the federal level, a bill currently before Congress (H.R. 5804) would repeal a 1978 law that protects independent contractors from “overzealous” IRS actions. And the proposed Independent Contractor Proper Classification Act of 2007, currently before the Senate, would impose a host of restrictions and burdensome reporting requirements on companies that use independent contractors.
In measures aimed specifically at trucking, the new Michigan Business Tax denies trucking companies the ability to deduct their payments to independent contractors. And Los Angeles’ recently enacted “Clean Trucks” program requires that any shorthaul truck entering the Port of Los Angeles starting in 2013 be driven by an employee — not a contractor.
These attacks will lead to a loss of flexibility that will hamstring the trucking industry and cripple employment — just when employment matters most. But the risk to the overall economy is still greater because the attack on independent contractors stretches across industries — and affects a startling number of U.S. workers and businesses.
According to the IRS, independent contractors account for 8% of the U.S. workforce; in all, there are 10 million. They are central to small business — which is itself the largest U.S. employer and job creator. Independents are a dominant force in several industries — not only transportation but also construction, technology and health care.
For the trucking industry, independent contracting is a proven business model that demonstrably creates economic health. Independent contractors and the companies that rely on them — within the trucking industry and beyond it — need to stand up and make that case.
Our organization — the Coalition for Independent Contractor Freedom — exists to give them a voice. We invite independent contractors to tell us their stories and to explain to legislators, policymakers, regulators and the public why independent contracting matters, and why it needs to be protected.
Working as an independent contractor is a fundamental American right — the right to work where you want, when you want, the way you want. Individuals, companies and the economy all benefit. In a time of severe economic challenge, we need to use all the tools available to us and take advantage of flexibility wherever we can to support construction and other vital industries. Independent contracting is the right tool, and it’s right here, right now. To restrict it is a serious mistake.
The author, a former chairman of the U.S. Hispanic Chamber of Commerce, is the founding chairman of the Coalition for Independent Contractor Freedom, Dallas.
