In today’s environment worker misclassification is a leading agenda item for both state and federal government agencies. The reality is that these agencies have more than a $4 Trillion tax gap that needs to be closed, and they have identified the Independent Service Provider (ISP) community as a focal point.
The traditional “tests” that have been used across industries that utilize Independent Service Providers are evolving and becoming more complicated. THE INDEPENDENT SERVICE PROVIDER MODEL IS UNDER ATTACK!
CMS and our proprietary ICMpower™ Solutions help companies and Independent Service Providers to align themselves with Industry Best Practices to mitigate the risks associated with misclassification.
CMS’ full-service ICMpower™ Solutions are designed to alleviate administrative burdens, create efficiencies within your organization and proactively address and preempt legal challenges.
ICMpower™ offers industry-specific solutions including:
The Same Day Small Package Industry, more commonly referred to as the Courier Industry, has been around since the 1800’s. Over the years, this industry has helped keep America moving in times such as westward migration, the gold rush, the founding of Wells Fargo to move gold and packages throughout the West, and the Pony Express, which was critical for California during the Civil War. This industry is currently made up of about 7,000 companies who rely on the use of Independent Service Providers to continue to keep America moving. In 2010, a survey was done on this industry, and it was reported that 84% of Courier companies use Independent Service Providers.
Companies in the Courier Industry deal with the last mile delivery of time critical materials that need to be distributed to the end use customer at all hours of the day and night. Due to the niche services offered to companies in industries such as medical, pharmaceutical, banking, etc., the flexibility of an entrepreneurial and variable workforce are critical to success. However, the Independent Service Provider Model is under attack in the Courier Industry. State and federal agencies believe the Independent Service Provider Model is used to avoid certain costs associated with the use of employees such as:
- Workers’ Compensation
- Unemployment Taxes
- Health Insurance Benefits
The reality is that this industry uses the Independent Service Provider Model because it is flexible and because ISPs have proven to be more productive than employees. ISPs are small business owners that recognize that the ability to make as much or little money as they want is based on their efforts. This model fits perfectly into the Courier Industry which needs reliable, hard-working individuals who can meet the ever-changing needs of customers. CMS offers its ICMpower™ Solutions and services in this market because they assist both companies and ISPs in their day to day businesses.
When a worker’s classification is challenged, the outcome will be determined by the individual facts associated with the day-to-day business interaction between company and ISP. CMS’ ICMpower™ Solutions assist companies and ISPs in documenting all tenets of the various tests and encourage both sides to operate in accordance with the terms and conditions of the mutually agreed upon contract.
The technology also creates an audit trail of all activities; so in the event either party has a question regarding their relationship, actual data can be pulled to support their position.
In addition to technology, CMS also offers companies and ISPs a wide variety of services and solutions that continually reduce costs and streamline their businesses.
Independent Service Providers have long been an important component of virtually every segment of the Trucking Industry, including but not limited to long-haul trucking, household goods moving, and intermodal operations. It is estimated that more than 300,000 ISPs work in the Trucking Industry.
For Motor Carriers, ISPs provide a valuable service. ISPs are seasoned businesspersons with truck-driving experience who are highly skilled and motivated. The availability of such ISPs and their equipment provides flexibility to meet fluctuations in demand for trucking services. Unfortunately, within the Trucking Industry, the Independent Service Provider Model is under severe scrutiny and obvious attack. With the impending driver shortage, ISPs continue to be a vital means for carriers to be able to meet the shippers’ growing demands. The challenges facing carriers that use the services of ISPs however continue to become more problematic and have permeated all segments of the industry. The American Trucking Associations launched the Independent Contractor Task Force in 2011 to assist with the legislative, administrative, and labor union challenges that are adversely affecting companies using ISPs.
Historically, the legitimacy of ISP status in the Trucking Industry has been widely recognized since the industry’s inception. Opening the validity of that status to specious IRS investigations and establishing onerous procedures inviting ISP discord would seriously undermine the efficiencies and opportunities the Trucking Industry has long enjoyed via its ISP business partners.
Understanding the inevitable reality that a company using an Independent Service Provider Model will face worker classification challenges, CMS maintains an intense focus on Independent Contractor Management (ICM). CMS’ philosophy is built into its ICMpower™ Solutions offering which helps companies and ISPs to operate in a true business-to-business relationship. ICMpower™ not only documents all aspects of the relationship that exists between a company and ISP, but also allows for both parties to expand their businesses through CMS’ network of companies, ISPs and business partners.
For the last 14 years, CMS has stood alongside its clients and has seen the malicious and direct attacks on the use of ISPs and recognizes that success is a moving target. If a company rightfully chooses the use of the Independent Service Provider Model, one of the key success factors is to ensure a fully documented, detailed and distant relationship that aligns with industry best practices as well as agency tendencies in all states.
Taxi / Limo
CMS offers its proprietary technology ICMpower™ in the Taxi and Limousine verticals of the Transportation Industry. The challenges facing companies that use the services of ISPs is pervasive across all segments of Transportation. There are certain nuances that exist in each segment, but the tests to determine worker classification are the same.
Statistics posted by the Taxi, Limousine & Paratransit Association show that 90% of all Taxi drivers and 50% of all Sedan drivers are ISPs. These segments of the Transportation Industry are exposed to the very same worker classification legislation as the Courier and Trucking segments.
Regardless of the segment, the same general principles apply:
- Direction and Control – There are many nuances, specific to each segment of Transportation, that demonstrate direction and control. However, these factors always start with the intent of the contract, how the parties interact “in fact” and extend through the termination or completion of the terms of the agreement.
- Relative Nature of the Work – This portion of worker classification tests is used to determine how much a company and ISP rely on one another financially. It is very similar to tests used to determine whether a worker is an Independently Established Business.
- Consistency of the Work Performed – One of the tests used to determine a worker’s classification is how long they provide a consistent service both in contract and in fact. If the terms of engagement too closely mirror those of an employee, misclassification may be found.
- Independently Established Business – When using the services of an ISP, it is important to ensure they are formally established as a business and offering their services to other companies.
CMS’ ICMpower™ Solutions assist companies and ISPs in documenting all tenets of the various tests and encourage both sides to operate in accordance with the terms and conditions of the mutually agreed upon contract.
In order to stay current on all ISP issues facing the Taxi and Limousine segments, show its industry support and help educate others, CMS remains an active member of both the Taxi, Limousine & Paratransit Association (TLPA) as well as the National Limousine Association (NLA).
CMS’ ICMpower™ Solutions bring features and benefits that allow you to more effectively manage, lead and guide your enterprise. Be in control of administering your compliance and documentation; and be consistent in your contractual relationship oversight of each ISP that provides you services.
Start improving your organization with CMS’ industry “best-practice” based approach to Independent Contractor Management; and align yourself with the professionals at CMS that are committed to improving your profitability, efficiency, and compliance today.