Despite FedEx’s insistence that thousands of their FedEx Ground drivers are independent contractors, a federal appeals court has ruled that they are actually employees – and entitled to compensation for their misclassification.
Identifying worker status is a critical but often difficult chore for employers, and misclassification can be costly. Contractors are denied many of the protections of permanent employees, such as access to employer-provided healthcare and other benefits, and are required to foot the bill for their own work equipment. For independent owner-operators, this can mean paying full price for truck maintenance and registration – not to mention fuel.
The ruling by the Ninth Circuit Court of Appeals (Alexander v. FedEx Ground) states that more than 2,000 drivers for the company were misclassified between 2000 and 2007 and are owed the monetary value of missed employer benefits as well as restitution for FedEx-branded equipment and other expenses the drivers incurred. This is the first case of several against FedEx regarding worker status that unequivocally categorizes FedEx Ground drivers as employees.
Another important element of this ruling for employers is the fact that a contract does not automatically make a worker an independent contractor. The IRS and state tax agencies have their own criteria for determining worker status, such as the “right-to-control” on which the Alexander ruling hinges.
FedEx has requested a review of the ruling by the full Ninth Circuit panel.
Truck companies that choose to employ an independent contractor model similar to FedEx’s should take the opportunity presented by the Ninth Circuit’s ruling to review their own policies for contracted drivers and adjust their policies – or their classifications – accordingly. Be sure that independent workers are compliant not with federal regulations and state regulations. It could save you millions in the long run.
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