The independent contractor business model has been around for quite some time, and has recently been moving beyond the construction and technology spheres (where it was most commonly utilized), into industries such as janitorial services, home health care, and even the restaurant business. An Intuit trend report published in 2010 projected that by the end of this decade, 40% of the American workforce will be comprised of contingent workers—a class that includes temps and independent contractors. While many companies stand by this hiring practice, others criticize the model as a way for businesses to penny-pinch when it comes to taxes, insurance, and Social Security contributions. Independent contractors’ salaries are not dictated by wage and hour rules, so they are not entitled to overtime pay, either (nor may they unionize). Their non-employee status also excludes them from the protection afforded by other labor laws such as those enforced by the U.S. Equal Employment Opportunity Commission.
According to current secretary of the U.S. Department of Labor, Tom Perez, not an insignificant percentage of employers are actually misclassifying their workers as independent contractors. In his March 2008 testimony before the House Economic Matters Committee, Perez declared this to be a “pervasive practice that cheats the state out of revenue, creates an unlevel playing field for businesses and deprives workers of their basic rights in the workplace.” This very concern is the basis of a slew of class-action suits that have been brought by hundreds of current and former FedEx Ground delivery drivers in dozens of states, who claim that the shipping subsidiary has been taking advantage of them ever since the company acquired Roadway Package System in 1998 and adopted the policy of treating drivers as independent contractors and not as employees. The plaintiffs are demanding back-pay for overtime and reimbursement for paycheck deductions for items such as professional uniforms and equipment, and vehicle cleaning and maintenance. They contend that they should be considered full employees in light of the extent to which FedEx Ground strictly dictated their hours and routes, personal appearance on the job, and other work-related expectations, as laid out in their carefully-worded contracts.
FedEx Ground has been facing these suits since 2009 and, for a few years, they were largely successful in convincing the judges of the legality of their policies; appeals courts in numerous states decided in their favor. This past August, however, the U.S. Ninth Circuit Court of Appeals in San Francisco revisited and overturned an earlier decision and ultimately declared Oregon and California drivers to be actual employees, deserving of the rights and benefits associated with such a status. This opened the door for other similar cases to be reviewed, and it appears as though the pendulum is swinging more consistently towards the rights of the workers, and away from the company employing them. Earlier this month in Kansas, the Supreme Court issued a ruling that validated the employee status of FedEx Ground drivers. That same week, the National Labor Relations Board came to the same conclusion. Yet, despite these losses (and the fact that they’re repeatedly being accused of playing dirty pool), the industry leader still maintains that the independent contractor arrangement benefits their workers as well as the company’s own bottom line. The shipper’s position is that the practice encourages entrepreneurship and offers more freedom and flexibility than the traditional workforce model, thus empowering the small business owners who work for them—and who were required to officially incorporate as such in order to keep their jobs, according to one plaintiff counselor Beth Ross. Workers’ rights groups, as well as the drivers, themselves, are adamant that the flexibility and advantages primarily benefit the employer, leaving the independent contractors with only a fraction of their earned income after having to bear the financial burdens that would (and should) have fallen squarely on the shoulders of FedEx Ground, had their employee status been honored from the outset. If all of the class actions in progress resolve in favor of the workers, their employer may have to deliver hundreds of millions of dollars in potential damages. The prospect of similar consequences—along with various state bills enforcing the proper classification of employees—just might encourage other businesses to take a closer look at their personnel policies.
According to current secretary of the U.S. Department of Labor, Tom Perez, not an insignificant percentage of employers are actually misclassifying their workers as independent contractors. In his March 2008 testimony before the House Economic Matters Committee, Perez declared this to be a “pervasive practice that cheats the state out of revenue, creates an unlevel playing field for businesses and deprives workers of their basic rights in the workplace.” This very concern is the basis of a slew of class-action suits that have been brought by hundreds of current and former FedEx Ground delivery drivers in dozens of states, who claim that the shipping subsidiary has been taking advantage of them ever since the company acquired Roadway Package System in 1998 and adopted the policy of treating drivers as independent contractors and not as employees. The plaintiffs are demanding back-pay for overtime and reimbursement for paycheck deductions for items such as professional uniforms and equipment, and vehicle cleaning and maintenance. They contend that they should be considered full employees in light of the extent to which FedEx Ground strictly dictated their hours and routes, personal appearance on the job, and other work-related expectations, as laid out in their carefully-worded contracts.
FedEx Ground has been facing these suits since 2009 and, for a few years, they were largely successful in convincing the judges of the legality of their policies; appeals courts in numerous states decided in their favor. This past August, however, the U.S. Ninth Circuit Court of Appeals in San Francisco revisited and overturned an earlier decision and ultimately declared Oregon and California drivers to be actual employees, deserving of the rights and benefits associated with such a status. This opened the door for other similar cases to be reviewed, and it appears as though the pendulum is swinging more consistently towards the rights of the workers, and away from the company employing them. Earlier this month in Kansas, the Supreme Court issued a ruling that validated the employee status of FedEx Ground drivers. That same week, the National Labor Relations Board came to the same conclusion. Yet, despite these losses (and the fact that they’re repeatedly being accused of playing dirty pool), the industry leader still maintains that the independent contractor arrangement benefits their workers as well as the company’s own bottom line. The shipper’s position is that the practice encourages entrepreneurship and offers more freedom and flexibility than the traditional workforce model, thus empowering the small business owners who work for them—and who were required to officially incorporate as such in order to keep their jobs, according to one plaintiff counselor Beth Ross. Workers’ rights groups, as well as the drivers, themselves, are adamant that the flexibility and advantages primarily benefit the employer, leaving the independent contractors with only a fraction of their earned income after having to bear the financial burdens that would (and should) have fallen squarely on the shoulders of FedEx Ground, had their employee status been honored from the outset. If all of the class actions in progress resolve in favor of the workers, their employer may have to deliver hundreds of millions of dollars in potential damages. The prospect of similar consequences—along with various state bills enforcing the proper classification of employees—just might encourage other businesses to take a closer look at their personnel policies.