Sen. John Kerry, D-Mass., has introduced legislation aimed at preventing employers in industries, including trucking, from misclassifying workers as "independent contractors" in order to avoid paying taxes or benefits.


The Taxpayer Responsibility, Accountability and Consistency Act of 2009 would amend the Internal Revenue Code to address Section 530 "safe harbor" provisions. Part of the Revenue Act of 1978, these provisions allow workers to be classified as "independent contractors" rather than "employees" in industries where such designations are part of long-standing, recognized practice.

The bill's sponsors call this provision a "loophole," which would be addressed by requiring information reporting and making changes to the safe harbor. Under the bill, businesses that pay any amount greater than $600 during the year to corporate providers of property and services would be mandated to file an information report with each provider and with the Internal Revenue Service. In addition, the bill would revise the safe harbor to reduce abuses and ensure employers have a "reasonable basis" for not treating an individual as an employee.

Over the years, Section 530 has been very valuable to trucking and other industries in eliminating expensive and contentious efforts by the IRS to reclassify contractors.

"This is about leveling the playing field and ensuring that America's workers receive the protections and pay they deserve," said Kerry. "We cannot continue to reward businesses who refuse to play by the rules."

Other sponsors of the bill include Sens. Dick Durbin (D-Ill.), Tom Harkin (D-Iowa), Chuck Schumer (D-N.Y.), Sherrod Brown (D-Ohio), Bob Menendez (D-N.J.), and Paul Kirk (D-Mass.).

The Teamsters union issued a statement, voicing its support of Kerry's bill.

"Misclassification hurts responsible employers who pay their taxes, provide health insurance and respect their workers' right to join a union," said Jim Hoffa, general president of the Teamsters. "It lets unscrupulous employers cheat workers out of benefits they're entitled to."

In July, the House introduced similar legislation aimed at getting rid of the Section 530 "safe harbor" provisions.

In a position paper written in response to the House bill, the American Trucking Associations said, "Taxpayers would be put back into the position of having to defend their independent contractor treatment in costly, fact-intensive litigation instead of simply invoking the protections of Section 530 as they are now able to do. The elimination of the industry-practice reasonable basis is also especially egregious because it strikes most heavily at industries like trucking where independent contractor participation is long standing and well-accepted. That legislation would create administrative nightmares for employers contracting with independent contractors."