Model Bill Targets Misclassification of Trucking, Courier Workers

March 7, 2011

State lawmakers who deal with insurance issues have approved a model law for the trucking and courier industries that sets guidelines for who is an independent contractor and who is an employee.

The National Conference of Insurance Legislators (NCOIL) last week adopted the measure at its spring meeting.

“We’ve heard that confusion over independent contractor and employee status is a problem in these unique industries and hope the model will eliminate uncertainty that causes major headaches for all. The model will help states ensure that businesses and state workers’ compensation systems aren’t unexpectedly burdened and that employees receive the benefits they deserve,” said Rep. George Keiser of North Dakota, who is NCOIL president.

Based on a 2009 Minnesota law, the bill includes a six point statutory “test” related to equipment ownership, operating responsibilities and costs, compensation, control over the work performed, and a certification statement in order to determine actual independent contractor status. Under the model, people who fail to meet all six standards are considered employees and subject to workers’ compensation protections.

The Internal Revenue Service and a majority of state states have been investigating companies that misclassify workers as independent contractors, rather than as full employees. The practice costs governments billions in lost revenue, can leave workers without workers compensation if they are injured while working, and without benefits if they lose their job.

A number of cases have involved Federal Express. In 2008, FedEx paid California $27 million to settle charges over how it was classifying workers. In October 2009, New York, New Jersey and Montana announced plans to sue FedEx for allegedly violating labor laws by misclassifying drivers to save money.

NCOIL said that among the parties providing input on the model act, aside from state regulators and industry groups, were representatives of the American Trucking Association, Dart Transit Co., Federal Express, International Brotherhood of Teamsters, Leadership Conference on Civil and Human Rights, Messenger Courier Association of America, National Employment Law Project and United Parcel Service (UPS).

NCOIL is an organization of state legislators whose main area of public policy interest is insurance legislation and regulation. Most legislators active in NCOIL either chair or are members of their state legislatures’ committees responsible for insurance legislation.

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