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October 15 2018

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28 The Journal of Commerce | October 15 2018 Government PORT AND TRUCKING leaders are watching for any impact on the already stretched drayage fleet at the Port of New York and New Jersey from a new state rule that truckers say will make it more difficult for owner-operator drivers to prove they are independent businesses rather than employees. The rule, which took effect on Sept. 17, erased an existing state rule known as the 20-factor test that the New Jersey Department of Labor formerly used to determine whether an independent contractor was truly independent, or actually so much under the control of a trucking company that the company was effectively an employer and the driver an employee. Owner-operators now have to ask the Internal Revenue Service (IRS) for a letter stating they are an independent operator, or provide an IRS audit that shows it, to prove their independence to obtain exemption from federal employer taxes. Whether that change will have a significant effect on the port's fleet and its ability to handle growing cargo volume — which increased 8.2 percent in the first seven months of this year — is unclear. The number of truckers affected, however, is potentially large: Trucks transport about 85 percent of the port's cargo, and independent contractors operate about 85 percent of the roughly 9,000 trucks that serve the port. Drayage capacity at New York- New Jersey and other big US ports has tightened dramatically because of a driver shortage that has plagued all of trucking for years, rising cargo volumes, and the requirement that drivers document their hours with electronic logging devices. The Teamsters union, which pushed for the rule change, believes a large proportion of the port's owner-operators could be found to be employees under the new rule. Truck - ers say the impact could range from merely creating an "administrative headache" for drivers to prompting some to leave the port, and perhaps the industry. John Nardi, president of the New York Shipping Association, which opposed the rule change, said it will be watching for impacts from the new rule, and is concerned that it will prevent the port from having a robust drayage capacity. However, the New Jersey Labor Department, which declined to comment on the rule change, depicted it in the New Jersey Regi- ster, where its enactment was reported, as a relatively minor rule adjustment that would clarify con- fusion over the problem of the state interpreting federal rules. The impact of the rule may also be muted by the fact that the issue of classification mainly emerges when the New Jersey Labor Department conducts an audit of a company, a relatively infrequent occurrence. The rule reflects a battle waged sporadically at US ports over whether owner-operator drivers are inde- pendent businesses or are actually employees of drayage companies. Tests to determine whether a worker is an independent worker, or is an employee — and whether they are misclassified — focus on the con- trol exerted by the contracting com- pany over the worker. In the trucking context, that generally includes issues such as whether the driver works for more than one company, the control they have over their workflow and what jobs they take, and who bought or funded the purchase of their truck and other equipment. Companies misclassify employ - ees for reasons including an effort to avoid paying overtime, vacation time, and other benefits companies would be required to pay if the drivers were classified as employees. At a minimum, trucking leaders say the new rule presents another bur- den on independent operators, who are by nature small operators with few extra resources with which to handle a required application to the IRS. "It's a more difficult path … It just makes it more difficult in an industry already suffering from a lot of other difficulties," said Gail Toth, executive director of the New Jersey Motor Truck Association (NJMTA), which opposes the rule change. "We've had people that submitted [a] request [to the IRS] and they never got answered … It just seems to be a maneuver to make it much more difficult for people to be independent contractors in the state of New Jersey." At worst, the rules could push independent contractors that fail the test — and are found to be employees — out of the port, said Tom Adamski, agent for First Coast Logistics, who represents the NJMTA's intermodal council. "It will drive people out of the business without question," said Adamski, who said the port's drayage fleet has been built on the fact that Classification concern New Jersey law on trucker classification has owner-operators on edge By Hugh R. Morley Of the about 9,000 trucks that actively serve the port, about 85 percent are independent contractors. Hugh R. Morley International | Washington | Customs | Security | Regulation

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