Three leading distribution experts warn bakery and snack manufacturers of the legal risks and challenges associated with independent contract distribution - the increasingly popular choice.
Speaking at Snaxpo 2013 in Tampa Bay Florida, general counsel for Snyder’s Lance Michael C. Anderson, president and CEO of Distribution Consultants John R. Staker and transportation policy consultant for the Snack Foods Association (SFA) Earl Eisenhart, joined forces in warning industry about the challenges with independent distribution.
According to John Staker, around 60-70% of the baking industry in the US uses independent route distribution systems.
Staker said that there is an ever-increasing shift towards this model along with a preference for warehouse distribution as opposed to direct store delivery (DSD) as companies look to cut costs.
Michael Anderson said use of independent contractors is a main focus for Snyder’s Lance.
“However, there is a lot of risk,” Anderson added. “People tend to view use of independent contractors as a ‘cop out’ as it cuts costs and gives no benefits of being an employee. There is also increased concern from state and regulatory bodies.”
A web of rules and regulations
Earl Eisenhart said one of the biggest regulatory challenges with independent contracting is how companies use the human labor.
Unions, the Obama administration and its Department of Labor, along with state and local governments, are all joined in the push to limit independent contracting fuelled by workers' rights and tax issues, he said.
The US government is looking to impose new regulations with a ‘Right to Know’ rule that would mean all manufacturers are required to provide a written analysis on why a person is an independent contractor rather than an employee.
“This would of course cause administrative burdens for companies and definition is likely to require legal advice from a professional legal counsel,” Eisenhart said.
While this is only at pre-rule making level unavailable for public comment, the Snacks Food Association (SFA) and broader industry have already raised concerns and made clear their position against the proposed law.
Managing and independent contracting system
Anderson said the key to operating a successful independent contracting distribution system is taking care of contractors. “You have to set them up to succeed and pay a living wage…I am constantly reviewing contracts, conducting weekly training and dealing with calls from independent contractors we work with… It’s a symbiotic relationship – the better off they’re doing, the better we’re doing.”
“You have to shift your mindset with how to deal with independent contractors versus employees. The very nature is that they are independent… You can control the end but not the means – your focus and involvement is on them achieving tasks, not how they do it.”
Staker said it is essential to keep abreast of new opportunities and channels. “You need to have a dynamic distribution attitude – it must be ever-changing, not stuck.”