Another Attack on Employers in Obama’s Budget

President Obama recently submitted a federal budget to Congress. Our examination of the Administration’s budget proposal reveals the larding of proposals that stack the deck against employers and toward union allies in his re-election year. Those proposals also reveal the unions’ current priorities in terms of their continuing attack on what they term “contingent employment” – independent contractors and part­-time and temporary employment.

In the Obama proposed fiscal year 2013 budget, the Administration proposes to repeal the section of the tax code establishing a “safe harbor” for independent contractors (called Section 530). The IRS would be authorized to issue a general guidance concerning the classification for workers instead of evaluating different companies’ situations on a case-by-case basis.

This proposal would eliminate the prospective certainty for federal employment-tax purposes that the code’s section currently provides for companies doing business with independent contractors.  Without Section 530, taxpayers would lose a good faith statutory defense against an IRS worker-reclassification audit.

The Administration also would allow an independent contractor paid $600 or more in a year to require the paying company to withhold a percentage of gross payments made.  If adopted, companies doing business with independent contractors would need to develop an accounting system for withholding and remitting to the IRS any rate requested by their contractors. Different contractors could request different withholding rates. Compliance costs for companies using large numbers of independent contractors would be substantial, to say the least.

In addition, independent contractors paid $600 or more in a year from a business would have to give the contracting company his or her certified taxpayer identification number (or “TIN”), which would then have to be verified with the IRS. This burdensome requirement could impede a firm’s ability to contract with a large number of independent contractors in a short period of time, such as to complete a large project, and would add to the costs associated with using independent contractors at all.

The Administration also would make employee leasing companies jointly and severally liable with their clients for federal employment taxes. This could be a problem for services referral agencies that refer independent contractors to third-party clients, depending on the definition of “employee leasing company.”  Overly broad criteria make services referral agencies liable for federal employment taxes for referred workers.

The Administration’s Labor Department proposed budget includes $14 million to pursue worker misclassification -- including $10 million for grants to states to identify misclassifications and recover unpaid taxes and $4 million to fund the DOL’s own enforcement efforts.

This follows a 2012 budget proposal of $46 million to combat misclassification, including among other things $25 million for grants to states to identify misclassification and recover unpaid taxes, and $15 million for DOL to investigate misclassification. About $4 million of the amount proposed for 2013 is described as a “funding increase,” which appears to be in addition to the $15 million proposed for 2012. 

For 2013, when you follow the budget money, you can determine the priority of the administration. Once again, the priority is unionization of the American workforce.

An Unshared Vision Creates a Pot-Holed Highway System

Last week in Washington, D.C., the IWLA Government Affairs Committee heard expert speakers discuss a variety of issues, including highway funding. Their analysis of the prospects of House Transportation & Infrastructure Committee Chairman John Mica’s bill’s chance of being passed by both houses of Congress were best summed up by one of the speakers: “I give it three chances: “fat, slim and none.”

One problem is that Mica and his Republican allies seek to pay for the bill through mechanisms that are dead on arrival to Democrats, such as opening up drilling for oil in ANWR. Another is that fiscal conservatives in Mica’s own party are balking at its sheer size at $260 billion. Yet, another problem is that for many, many years, the Highway Trust Fund has been raided by members of Congress for earmarks to keep their local voters happy with them.

What is lost in the political jockeying is the wealth of the American people. The purpose of a fee on highway users was to create and maintain a connected United States that moves people and freight in a safe and efficient manner. What has devolved is the creation of a pot of money divided and allocated among special interest and pressure groups for things like mass transit and bike paths. The losers are the American people who over pay for an under-developed and uncompleted system.

Safe, efficient and reliable freight movement is and will continue to be the lifeblood of the U.S. economy. Jobs and commerce depend upon an integrated network of freight infrastructure to support trucking, freight rail transportation, port activity and intermodal transfers. To do this right demands that policymakers return to the concept of moving people and freight and not funding special projects with other people’s money.

The War on Warehouse Employment

Although you may not have noticed it, for the past year or so we’ve begun to see the first stirrings of a union-sponsored smear campaign aimed at the commercial warehouse industry. Every so often a news story would appear that when examined for its origins could always be traced back to unions and their allies.

The goal appears to be to create in the minds of the public and policymakers that warehouse workers are oppressed, badly paid and poorly treated. Of course, this means they require rescue and protection by the government and unions.

The charges leveled at the warehouse industry are that we pay poorly, use temporary workers from staffing agencies to avoid the threat of unionization, and offer little more than unrewarding jobs where employees face no chance for professional advancement or improvement of their skills and future earnings. In this picture, we are the 1%, exploiting the 99%.

Let’s look at the reality. IWLA’s approximately 500 warehouse member companies are incredibly diverse, as is the industry. They range in size from nationwide and international firms to smaller regional operations. Many of them use full-time employees heavily and some of them are governed by collective bargaining agreements.

Warehouse companies do not use temp staffing agencies or temporary and part-time workers to avoid union organizing or paying employee benefits. In fact, it would be impractical and expensive beyond reason to attempt to do so given the sheer expense involved and the fact that the temporary staffing firms are subject to the same state and federal wage and labor laws as are other employers.

When our warehouse members do use temporary workers or staffing companies, it is either because of the seasonal nature of their business, or in the case of employee staffing companies, it may be so that they can outsource personnel management functions to allow their management can concentrate on their core operational strengths.

The nature of the third-party warehouse logistics business is such that this work is performed on a contract basis to meet a particular need, which may be temporary or ad hoc, and in some cases is highly seasonal. We don’t need to tell DC Velocity’s readers that retailers who needed additional distribution services during the Christmas shopping season don't require the same level of service when the holidays end.

Although some warehouse work is handled by entry level employees, the range of professional disciplines and opportunities is broad. Warehouse work is no longer largely a matter of carrying boxes around. Today’s warehouse operation requires the knowledge and abilities of people in IT, industrial engineering, operations supervision, and transportation and compliance management.

It also is an industry that boasts unprecedented mobility and a career ladder open to those who choose to make warehouse work a career instead of a student summer job or a stop along the way to other employment. If you think I am exaggerating, just ask IWLA Past Chairman Jere Van Puffelen, CLP, who rose from the warehouse floor to become President of Prism Team Services, Danville, CA.

We know that those who work in the logistics industry are aware of many of these facts, and we hope you will join us in speaking up when lies about our industry are being spread by those with ulterior motives and adherents to an ugly ideology.