Static over status of independent contractors

By: Mark Fitzgerald

The fight over independent contract status for newspaper carriers – a battle that many publishers figured was settled decades ago in courts and federal agencies – may be re-igniting.

Signs of the coming battle abound, labor experts warn. Legislation that would tighten the standard for claiming independent contractor status is pending in Congress. The National Labor Relations Board has a new chairman who dissented on a landmark 2005 case holding that newspaper carriers were independent contractors. The IRS is adding personnel to challenge more independent contractor claims. Cash-strapped states, their unemployment benefit funds dwindling in the jobless recovery of the Great Recession, are casting about for new sources of revenue.

And then there’s the case of Freedom Communications, which last year agreed to a $28.9 million settlement with carriers who claimed they were actually employees of its flagship Orange County Register. (The amount the carriers will actually get is certain to be dramatically lower because of Freedom’s bankruptcy. The settlement also was not an admission the carriers were employees.)

“Independent-contractor status is under assault nationwide right now,” declares L. Michael Zinser, the management-side attorney who heads Nashville-based Zinser Law Firm.

Zinser isn’t so much worried about the O.C. Register settlement – “That hasn’t been a game-changer as far as I can see,” he says – but he says newspapers should be worried about challenges that wind up in front of the NLRB. President Obama appointed Wilma Liebman as chairman of the board, which in 2005 ruled that carriers at the St. Joseph (Mo.) News-Press were indeed independent contractors as the newspaper contended. Liebman dissented in that case, borrowing from European courts the concept of “dependent contractors,” that is, that individuals cannot be independent contractors because they do not have the same bargaining power of large companies.

“Liebman was frank about saying she is hostile to the independent contract concept,” says Zinser.
Publishers also need to keep an eye on two bills he says are designed to attack independent-contractor status, including one amending the federal Fair Labor Standards Act called the “Employee Misclassification Prevention Act.”

The IRS is already targeting newspapers, says Zinser, who personally handled four such cases in the last year alone. In each case, the IRS sent the publisher a Form SS-8, used to determine employment status. Zinser’s advice: Don’t fill out
the form, but send a letter explaining the carrier in question is a “direct seller” under terms of the Small Business Job Protection Act of 1996.
John Murray, the Newspaper Association of America’s vice president of audience development, sees the bigger threat at the state level, where the agencies that have to come up with unemployment compensation are looking for revenue. “They’re not looking for a landmark case that would make the independent contractors be employers, but they would like independent contractors to contribute to unemployment insurance,” he says. “I will say newspapers have had to pay a lot more attention to the status of their independent contractors.”

One way to avoid the problem, of course, is outsourcing
distribution. “There’s no question those relationships are
independent contractors,” Murray says. “That’s happened at a lot of papers, and while I hesitate to say it’s a reaction to [fears about challenges to the status of carriers], it’s an element of how things have evolved.”
At CIPS Marketing Group, one of the nation’s biggest companies for outsourced newspaper alternative delivery, all independent contractors are required to file a so-called DBA
(doing business as) statement.
“Our deliverers generally have two or three people working for them, and the fact that they’re doing different things all day and we allow, in fact encourage them, to do projects for other companies demonstrates the independent-contractor status,” says CIPS’ vice president of business development, Kennedy Higdon.

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