Courier or Messenger as Contractor or Employee? Compliance with Department of Labor
When it comes to dealing with the Department of Labor, there is only one prudent approach: keep meticulous records and self-audit regularly. It’s not that the DOL is a particularly frightening group, but increasingly public conflicts suggesting wage theft and avoidance of employer responsibilities continue to shine a bright light on the gravely imperative nature of keeping the right records and operating within the proper constraints. It is the DOL’s persistence in the auditing of independent contractor relationships which has put a tremendous amount of pressure on businesses which operate with primarily contracted workers.
The issue is not exclusive to any particular industry, but it seems that there are numerous rich targets in the area of logistics, as recent decisions impacting FedEx and UPS reflect. Described in an MSNBC article quoting David Weil’s book “The Fissured Workplace”, the decisions supporting the DOL in the 9th Circuit “further undermine the “devolution of the proletariat” — corporate America’s ongoing effort to shed front-line, often low-wage employees through independent contracting, subcontracting, and franchising arrangements”. The two federal appellate decisions disputed FedEx’s contention that its drivers in California and Oregon were properly classified as independent contractors. While there are many situations where the argument supports fair treatment for workers who operate more as employees than contracted workers, there is an equally substantial base of business where the performers are contracted and independent and should remain free to operate as such.
One of the industries directly in the crosshairs of the Wage and Hour Division of DOL is the courier and messenger industry. Couriers and messengers pick up and deliver messages, documents, packages, and other items – generally between offices or departments within a business, or directly to other businesses or individuals – and do this while traveling by foot, bicycle, motorcycle, public transportation or private vehicle. The Bureau of Labor statistics in 2012 indicated that almost 25% of those classified as couriers and messengers were local messengers and delivery providers, and that the highest concentration of these providers is in New York.
So what’s the deal with DOL versus courier/messenger services and their clients as it relates to the “contractor independence” issue? Well, the initial approach by the DOL is often to consider the hiring authority (the client) as a Professional Employer Organization or simply as an employer. This approach is often forwarded regardless of the provider’s owner/operator status, and may be due to a lack of supporting evidence that the courier was actively soliciting additional business from other sources (which is generally not the problem of the client, but in this case could be). There is a requirement to substantiate not only the client’s position that he is not the employer, but to satisfy recordkeeping for the courier or messenger, as well, proving independence and having the necessary paperwork and proof to support the claim.
In a business where people are frequently on the move, scheduling jobs between pickups and deliveries, there isn’t a lot of time to spend filling out paperwork and getting written agreements. These folks are working even as they’re scheduling more work, and a lot of this activity is done via text or telephone while riding a bicycle. The circumstances of how this industry works makes compliance a particularly difficult task, and the DOL doesn’t have to schedule audits and compliance visits – they can approach a business at any time and request to review records, observe activities, and more.
Given the frequency of such investigations and audits, every business in the industry should be looking for a simple and foolproof solution to keeping the right paperwork and records that will support the business operator claim of independence and protect them from unnecessary cost or litigation. This is where an accounting professional or consultant may provide assistance, identifying the tools and developing the processes to ensure proper reporting and compliance with regulations on both sides of the transaction. Without the proper documentation and evidence supporting the position of the client as well as the provider (the courier/messenger), both parties may end up finding themselves in an unintentional and costly relationship.
Make Sense?
J
Accountants, bookkeepers and small business consultants have recognized the benefits of accessing client information remotely, where all parties can work on the same data in real-time, creating the opportunity to maintain more timely and accurate financial data for the business client. The Internet has become the network, facilitating a variety of different working models which allow users, regardless of location, to access business information and data to get their work done.
One company earns what the other company spends. This is business, and it seems like it would be pretty straightforward, accounting for the money coming in and the money going out. But it is really not that simple when it comes to business finances and accounting for revenue. With investor pressure to improve share prices and market pressures forcing greater competition, businesses have always sought out ways to make the performance look as good as possible – on paper even if not in reality. It is this requirement to make the business look better than it may actually be that drives “innovation” in financial reporting, and encourages some companies to use whatever rules are available to mislead investors or paint a rosy picture for stakeholders. When the balance is lost and financial reporting standards become so oblique as to allow regular and gross misrepresentation, it is time to change the standards.
Cooper Mann Consulting 