Topic:
LABOR DEPARTMENT; NEWSPAPERS; UNEMPLOYMENT COMPENSATION; PRESS; TAXATION (GENERAL);
Location:
MEDIA; UNEMPLOYMENT COMPENSATION;

OLR Research Report


April 13, 2006

 

2006-R-0288

NEWSPAPER CARRIERS AS INDEPENDENT CONTRACTORS

By: John Moran, Principal Analyst

You asked (1) how many daily newspapers in the state consider their adult paper carriers to be independent contractors, (2) whether they pay unemployment taxes on these carriers as they do other employees, and (3) for background information on how these carriers are treated under state unemployment insurance (UI) benefit law.

SUMMARY

We surveyed 17 daily newspapers and each of the 14 responses we received indicated they treat their paper carriers as independent contractors and do not pay unemployment tax on them. Every responding paper said carriers must sign a contract that, among other things, states the carrier is an independent contractor.

By law, employers (with some exceptions) must pay unemployment taxes for each employee. If the Labor Department (DOL) determines that an employee is an independent contractor, the employee is not eligible for UI benefits and the employer is not liable for the UI benefits.

Under Connecticut law, newspaper carriers are usually found to be employees and the employer must cover the cost of appropriate unemployment benefits even if it did not pay unemployment taxes on the particular worker. DOL uses a three-part test, known as the ABC test, to determine if the employer-employee relationship is one that falls under the UI compensation law.

RESPONDENTS TO THE NEWSPAPER SURVEY

The following newspapers responded to the survey and indicated they treat newspaper carriers as independent contractors:

1. Connecticut Post, Bridgeport;

2. Danbury News-Times;

3. Greenwich Times;

4. Hartford Courant;

5. Manchester Journal-Inquirer;

6. Meriden Record –Journal;

7. Middletown Press;

8. The Herald, New Britain;

9. The Hour, Norwalk;

10. Norwich Bulletin;

11. Stamford Advocate;

12. Torrington Register-Citizen;

13. Waterbury Republican-American; and

14. Willimantic Chronicle.

BACKGROUND OF LABOR DEPARTMENT'S DETERMINATION OF CARRIER EMPLOYEE STATUS

State law exempts newspaper carriers under age 18 from coverage under the state UI law. DOL generally finds adult carriers who claim unemployment benefits under state law to be employees of the newspapers and thus eligible for UI benefits if they meet the other standard criteria.

State law establishes the three elements, known as the ABC test, which must be met in order to show an individual is an independent contractor.

The individual must be shown to be:

1. free from direction and control of the employer in connection with the performance of the service, both under the contract and in fact;

2. performing a service either outside the usual course of the business for which the service is performed or outside of all the places of business of the employer; and

3. customarily engaged in an independently established trade, occupation, profession, or business of the same nature as the service being performed.

The Labor Department has generally found that adult newspaper carriers do not meet all three parts of the test, as they are not free from “direction and control” of the newspaper and they are not “engaged in an independently established trade.” To meet the latter requirement they would have to deliver newspapers for more than one publisher. The department often has found those who independently deliver for more than one publisher to be independent contractors.

Although the newspapers typically require the carriers to sign contracts saying they are independent contractors, the contract itself does not establish that fact. The contracts often include requirements that suggest the individual is under the control and direction of the paper including: (1) assigned delivery routes and (2) predetermined and required delivery times. (See Attachments 1 and 2 for contract examples.)

When DOL rules a claimant who was a carrier is eligible for UI compensation, the newspaper must pay the cost of those benefits into the UI system if it did not pay UI tax on the claimant while the person was employed.

FEDERAL EXEMPTION

The state Employment Security Advisory Board (ESAB), which advises the Labor Department on UI issues, recently noted in a report that since 1996 adult carriers and newspaper distributors are exempt from coverage under federal unemployment law. This federal change prompted newspaper publishers in Connecticut to seek a similar change in the state law. The ESAB, which is made up of representatives of business and labor, reviewed this issue and recommended leaving the state law unchanged. In its recommendation the board noted:

1. Congress did not mandate that states enact a corresponding exemption for newspaper carriers, thus leaving the decision up to the states.

2. Many of these jobs are performed by low-income workers who need the protection of UI to the same extent as other categories of workers.

JM:ts