Employee or Independent Contractor

Employee or Independent Contractor

by Cliff Lynch
30. September 2013 11:58

Several years ago, Intuit predicted that by 2020, 40% of the U.S. workforce would consist of independent contractors rather than company employees. This trend is evident in the supply chain industry where we have seen firms such as FedEx Ground classify its drivers as independent contractors rather than employees of the company. This has not been a universally popular business model, and the courts have tried to curtail it somewhat. Also a number of states have jumped into the fray with legislation seeking to force employees to classify drayage and parcel delivery drivers and employees rather than independent contractors.

New Jersey provides an interesting example. Recently, the passage of the Truck Operator Independent Contractor Act established the presumption that all such drivers were to be classified as employees. With what I think was extremely good judgment, however, Governor Chris Christie vetoed the bill. His concern was that this legislation could drive truckers from the state. This could even divert traffic away from New Jersey ports if there is not an adequate network of trucking companies to provide drayage service. In addition, criminal penalties for misclassification, even if unintentional, would be significant.

I believe it is inappropriate to enact this type of “one size fits all” legislation, particularly in the supply chain industry. While it is true that a firm can eliminate benefit and some other personnel costs, that doesn’t make the independent contractor model inherently bad. These are business decisions that should be left to the firms, not the legislature. Interference with these decisions by any state could encourage a departure from the area, thereby eliminating both jobs and resources.

Thumbs Up to Governor Christie.

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