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Mariners pay the price for being independent contractors at sea

Mar 3, 2020 01:00 PM

I had agreed to take the mate’s position on a 350-foot ship transiting from a shipyard in Bellingham, Wash., to the destination port of Bath, Maine. It was my second week of working long days in port, helping to get the vessel ready for sea, the plan being to get underway in a few days. That morning, I was in the chartroom laying out courses for the first leg of the trip when the owner’s representative came up to the wheelhouse. Holding a big folder of paperwork, he handed me a sheet of paper and in a thick Norwegian accent said, “You have to sign this.” Taking it, I asked what it was. He replied, “It’s a contract that states you agree to being an independent contractor working in the mate’s position for the voyage, and that you are not an employee of my company. That, and the daily rate we are offering to pay you.”

That was the first time in my career I had ever been asked to sign such a form, and frankly, it made me uncomfortable. Not knowing what kind of problems I could cause myself if I agreed to the contract, I looked it over closely but did nothing more. Impatiently, he stuck his pen in my face and demanded, “Sign this contract now.” I retorted, “When I got hired, this independent contractor idea was never brought up. Now you ambush and start strong-arming me to sign a contract that I’ve had less than five minutes to read and think about.” The owner’s rep looked at me disdainfully and said brusquely, “If you don’t sign this, then forget about making the trip.” The job was a “one-off” vessel delivery — I did not plan to work for this company again. So, as he stood there confrontationally, I told him, “Thanks to you, I’ve decided not to make the voyage. I’ll finish my day and then go home.”

I had previously met a few mariners who worked as independent contractor crewmembers on commercial vessels, mainly in the Gulf of Mexico, but never having been offered such a contract myself, I had not given it much thought. Afterward, I did some research on being an independent contractor at sea, and I became thoroughly convinced that I had made the right choice not to do the trip. Companies offer positions as independent contractor crewmembers on their vessels, I learned, to make things cheaper and easier for them.

Hiring independent contractors gives the company the opportunity to get crew for less money, avoiding a number of costs that would have been required had the mariners been hired as employees. For example, employee crewmembers generally receive health insurance, vacation pay/time off and retirement benefits. Not so for those hired as independent contractors. Not only do they have to purchase their own health insurance, but because the company does not deduct Social Security and Medicare taxes for independent contractors, they must personally figure out how much is owed and then pay the IRS estimated tax payments out of their own pocket at required times throughout the year. If they don’t, they risk incurring fines for delayed or missed payments.

What all this means in practical terms is that without a guarantee that their daily rate is any higher as a result, independent contractor crewmembers must pay thousands of dollars out of their own earnings. It can take from $1,000 to $5,000 for every month on the job just to cover the self-employment taxes that all independent contractors must pay directly to the IRS. That could easily mean shelling out $10,000 for an entry-level position and $40,000 for a captain or chief slot every year. Plus, depending on the mariner’s personal situation, it could cost an additional $3,000 to $12,000 a year out of net earnings to pay for health insurance. There is a lot more financial paperwork involved, too, including filing forms such as Schedule C and Schedule SE with yearly tax returns — documents that may necessitate paying a hefty fee for a tax accountant to complete.

Another financial drawback to sailing as an independent contractor at sea is that, unlike for employees, companies do not pay into a state unemployment insurance program. Years ago, I got laid off from my tanker job right as my wife and I were in the middle of building our house. The first thing I did was apply for unemployment benefits through the Washington State Employment Security Department. As a company employee, once it was verified that I’d been laid off, in short order I was receiving a weekly unemployment insurance check — money that kept my family afloat for three months until I landed another job with a different tanker company. Had I been an independent contractor, I would have had no access to unemployment insurance funds.

Finally, aside from the financial risks involved in accepting a crew position as an independent contractor, there are possible legal ramifications. When a merchant mariner is hired as an employee crewmember on applicable vessels, there is no doubt that he or she is entitled to the protections offered by the Merchant Marine Act of 1920 (Jones Act). Getting hired as an independent contractor, however, could conceivably nullify those protections. Depending on what company is paying the mariner’s earnings, who directs the operations of the vessel, and what duties the mariner performs on board, in the event he or she is injured on the job the company could claim that the independent contractor is not a Jones Act crewmember. Consequently, the provisions of the law — including maintenance and cure, and the right to make a claim against the shipowner for damages due to negligence or unseaworthiness — might not apply.

Make no mistake, when you sign a contract to work as an independent contractor crewmember on a commercial vessel, you willingly give up a number of benefits that you’d normally be entitled to as an employee. That’s why, in my opinion, the independent contractor scheme is nothing more than a ploy used by exploitative vessel operators to pay mariners less and skirt U.S. law. I can say that, without a doubt, if I were once again offered the opportunity to sail as an independent contractor crewmember, my answer would be a resounding, “No way!”

Till next time, I wish you all smooth sailin.’

Kelly Sweeney holds a license of master (oceans, any gross tons), and has held a master of towing vessels license (oceans) as well. He sails on a variety of commercial vessels and lives on an island near Seattle. You can contact him at captsweeney@professionalmariner.com.

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