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PSN on July 27, 2006 - 8:31am
For years, the delivery company FedEx has claimed that its ground drivers are not employees but independent contractors-- meaning the company didn't have to pay for workers compensation, unemployment insurance or extend a range of other worker protections.
But along with two Internal Revenue rulings, decisions by the California Unemployment Insurance Appeals Board have found that FedEx exercised such strict control over its drivers that their nominal independent status was a facade designed to undermine the labor rights of employees and evade millions in taxes owed the state. The ruling in California is part of a trend of governments reining in abuses by companies misclassifying workers as independent contractors.
In February, the National Labor Relations Board ruled that 23 FedEx drivers in Worcester, Massachusetts had the right to form a union despite their nominal "independent" status. Across the country, hundreds of employees in thirty states have filed class-action lawsuits against FedEx Ground over the company's abuse of independent contractor laws.
As this Business Week profile highlights, abuse of independent contractor laws is one reason FedEx has been able to take market share from United Parcel Service, where employees have been able to form unions and demand better pay unlike FedEx Ground which has claimed exemption from labor laws based on its employees "independent status."
FedEx is just a high profile example of an all too common abuse of workers by misclassifying them as independent contractors. Beyond action by government agencies, states are increasingly proposing new legislation to tighten these rules to protect employees, as this guide to Combating Independent Contractor Misclassification in the States by the National Employment Law Project explains.