In preparing to write an article on the EDD�s campaign against California delivery companies, a Los Angeles Times reporter interviewed NICA Director Tim Bergen.  The article, �Delivery Companies Pressured,� [http://www.latimes.com/business/taxes/la-fi-contractors5dec05,1,2760913.story?coll=la-headlines-business-taxes] appeared late last year. 

Feeling that his comments and NICA�s services were misrepresented in the article, Bergin responded with several key clarifications. His comments, in part, follow.

�The real story of independent contractors use in California begins about four or five years ago when the California Workers� Compensation market started to experience problems.  At that time, a number of California courier companies that utilized the Employee Driver Operator Model were paying approximately fifteen dollars per one hundred dollars in employee driver wages for worker�s compensation. 

�The fifteen-dollar figure quickly jumped to the mid-twenties, which increased to mid-thirties and in some situations exceeded forty dollars.  The net result of the workers� compensation crisis is that many courier companies experienced a significant loss in operating revenue and were faced with essentially three options: close the doors, leave the state, or explore a new business model.  Not surprisingly, in order to survive, several courier companies made a business decision to transition to an independent contractor driver model.  NICA�s role was simply to provide an efficacious way to service these new independent contractor relationships.

�I note that Mr. Lifsher made no mention of the numerous and successful NICA independent contractor status challenges before Administrative Law Judges, the California Unemployment Insurance Appeals Board (CUIAB) and the Department of Labor.  Over the years, NICA has relied upon these legal challenges to conform its business practices to the existing law and has even developed an educational program based upon these legal principles for independent contractors and contracting companies.  However, given the heightened level of audit activity, it appears now that even prior favorable decisions may be of little consequence to preventing or passing an EDD audit.  This is clearly illustrated in the plight of one Los Angeles-based courier company that has won two California Unemployment Insurance Appeals Board (CUIAB) cases and one Administrative Law Judge decision upholding the independent contractor status of certain drivers.  Nevertheless, the EDD still audited and assessed this same courier company and is now seeking an administrative determination that other independent contractor drivers were employees.

�Coincidentally, these aggressive EDD practices are the very reason for the passage of AB1643 in the past year.  AB1643 signed into law by Governor Schwarzenegger on September, 28, 2004, requires the EDD to conduct a 12-month study and report to the legislature by July 1, 2006, regarding existing classification procedures.  More particularly, AB1643 requires the EDD to report on the following: 1) the number of small business owners who have objected to being classified as employees in the past five years; 2) the number of those found to be independent contractors and 3) the length of time it took to make final findings in each case. 

�It is very puzzling why such a momentous event related to the independent contractor classification issue was never referenced in such an allegedly fair and balanced article.  It is also puzzling why Mark Ridley Thomas, a Los Angeles Assemblyman and creator of the bill, was apparently never interviewed by the L.A. newspaper for his perspective on this issue. 

�An October 1, 2004, National Association of Woman Business Owners (NAWBO) press release points out that AB1643 was sought after woman-owned businesses and other companies found themselves facing extensive state audits, fines, attorney�s fees and back taxes.  The press release further notes that state officials insisted on viewing companies and independent contractors they used as employer and employees.  Accordingly, AB1643 makes it clear that the EDD�s campaign against NICA and the courier industry was preceded by the EDD�s campaign against small businesses in general, particularly those utilizing independent contractor consultants.

For more information, visit NICA on the Internet: www.nicainc.com, or call:  800-551-NICA.