The contracting process

Mike Zinser

In the litigation of whether a newspaper distributor is an employee or an independent contractor, the "contracting process" is often examined very closely. The reason for this examination is that the court or agency wants to be sure that both parties entered into the agreement with the intention to create an independent contractor relationship. What occurs during the contracting process can help evidence independent contractor status.

1. Contractor Recruitment – Give care to the drafting of print advertisements you place in your newspaper to recruit newspaper distributors. The ad should be titled "Business Opportunity." It should note that the opportunity is to deliver newspapers as an independent contractor. Avoid terminology such as "part-time job." This is not a job, it is an contract. If you feel the need to discuss contract compensation, speak in terms of "potential profits." Whatever you do, do not use the standard language placed in employment ads, stating, "We are an equal opportunity employer." Remember: this is not employment.

2. Review of the Written Contract – It is important that the company representative and the prospective contractor spend time reviewing the entire written agreement. Explain to the individual that he or she will be an independent contractor – and not an employee. As each page is reviewed, allow the contractor to ask questions. Have the contractor initial the bottom corner of each page as it is reviewed. This will help cement the contractor's intention to become an independent contractor. I recommend that the contract be drafted with the text, "I have read and understand this page," along with a line for the contractor's initials, printed on the corner of each page.

Start the process with a "blank slate." Rates, for example, should be left blank at the start of the meeting. Starting the contracting process with rates already typed in creates the impression that the rates are not negotiable. Negotiation of rates is very important in today's litigation environment. Do not be afraid of negotiations.

Allow the contractor the option to have the contract reviewed by legal counsel or his or her accountant. Explain to the contractor that he or she will not be eligible for Workers' Compensation or Unemployment Compensation. Explain to the contractor that he or she will have the right to determine the sequence of newspaper delivery on the route.

Assure yourself that the contractor understands and reads the English language. If there is a language barrier, you should consider having the contract translated into the contractor's native language. There are reported newspaper cases wherein a newspaper distributor has been found to be an employee because it was later proven that he could not read English and did not understand spoken English. The court held that there was no way this individual could have entered into this agreement with the intention of being an independent contractor.

It is critical that your representative be very familiar with the written contract you are using. Only if your representative understands your contract will he or she be able to answer the prospective contractor's questions in a thorough and meaningful way.

Be sure to give the contractor a copy of the final, signed Independent Contractor Agreement.

3. Complete IRS Form W-9 – At the time of contracting the newspaper distributer, have the individual also complete IRS Form W-9. When the contractor signs the W-9, it documents independent contractor status. The contractor must check a box on the form, selecting his or her form of business organization – be it sole proprietor, partnership or corporation. This helps you later prove that the contractor owns his or her own business. Use this execution of this document to explain to the contractor that he or she will be responsible for paying all federal, state and local taxes, and that the newspaper will be withholding no taxes from contract compensation.

4. Independent Contractor Carrier Accident Insurance – It is common for the newspaper to make the contractor aware of Carrier Accident Insurance. It is important that the company's representative understand this product very well. If properly explained to the contractor, he or she will opt to purchase this coverage. This is also another opportunity to document independent contractor evidence. If the contractor rejects the coverage, have the contractor sign the rejection card and keep it with the contract. This is evidence that the contractor is making a business decision not to incur that expense. If the contractor purchases the insurance, be sure to give the contractor a copy of the policy. Explain that he or she will pay the entire premium.

5. Driver's License and Insurance – It is common to obtain a copy of the prospective contractor's driver's license and vehicle insurance information. Make a photocopy of these items and keep them with the contract file.

6. Sample Invoice – Review with the contractor a sample of the type of invoice he or she will receive. Go over the frequency of invoicing and the information contained in the invoice.

7. Computer-Generated Bundle Top – With the pickup of his or her daily newspapers, the contractor will also receive a computer-generated bundle top information sheet. Review with the contractor that this sheet will list starts, stops and delivery complaints received from subscribers.

8. Multiple Contract Documents – If the contractor is going to be delivering more than one route, have the contractor execute a separate agreement for each one. This is evidence that the contractor has the right to contract for more than one area. It is stronger evidence of independent contractor status.

9. No Newspaper Delivery without Written Contract – Whatever you do, do not allow an individual to begin delivery of the newspaper prior to signing the written Independent Contractor Agreement. Just imagine the confusion and finger pointing if the independent contractor newspaper carrier had a serious automobile accident while delivering newspapers without a contract. The contractor would be in a position to deny independent contractor status and claim employee status to try to shift liability to the company.

Conclusion: The contracting process is a very important ingredient in proving independent contractor status. Train your team to do this effectively and you will be well positioned to prove independent contractor status in litigation.

L. Michael Zinser is the founding partner of The Zinser Law Firm in Nashville, Tenn. The firm, which has a heavy concentration of clients in communications media, represents management in the area of labor and employment. Zinser can be reached at (615) 244-9700 or mzinser@zinserlaw.com.