About a month ago, I wrote a post about the difference between independent contractors and employees. In that post, I noted that,
“Because designating a worker as an employee or an independent contractor carries tax, discrimination and labor laws consequences, many states are cracking down on employers who deliberately choose to use the wrong label. And, as Minda Zetlin shows, whenever they catch these employers who are trying to "cheat the system", the penalties they levy can be severe.”
Well, today’s post shows what happens when a huge company – FedEx – gets caught in the independent contractor v. employee conundrum.
As Kate Taylor discusses, the Ninth Circuit Court of Appeals recently ruled that 2,300 individuals working for FedEx Ground in California and Oregon had been misclassified as independent contractors instead of employees.” The result is that FedEx may now “have to pay up millions of dollars for the costs of branded trucks, uniforms and scanners, as well as wages, overtime compensation and penalties.”
So what was the basis of the court's against FedEx? As we discussed in our June 24, 2014 post, it all turns on the issue of "control". The Ninth circuit points to FedEx driver’s “appearance standards, what they are delivering, when and how – that to classify drivers as anything but employees is a money-saving scam by FedEx.” In so doing, FedEx is able to get their “workers [to] complete the same work as employees at UPS or the U.S. Postal Service for less pay and no benefits.”
As Taylor points out, this lawsuit is not unique… “supposedly [more] independent contractors and franchisees are pushing back against company control.” Apparently, recently contractors and franchisees have filed suits or complaints with the National Labor Relations Board against McDonalds and 7-Eleven. There is concern that, depending on the outcome of these complaints, the entire franchise model might be in jeopardy. (But that is something we will discuss in another post.)
Currently, this FedEx ruling only applies to FedEx drivers in Oregan and California plus, they will probably appeal this ruling to the Supreme Court. But, if they lose, do you think they will pass on these extra shipping costs to us? Or, seeing that FedEx is in tight competition with UPS and the USPS, do you believe they will have to eat those costs? Only time will tell.
But, one thing is certain. If you really want to protect your company from a lawsuit, you have got to pay attention to the difference between employee and independent contractor.
