January 9, 2005

Independent Contractors, Revisited

In a January 6, 2005 article in the Wall Street Journal (available to subscribers only -- but accessible at the Teamsters website), Monica Langley outlines the working conditions of "independent contractors" who work for FedEx. They drive their own vehicles, but wear FedEx uniforms and adhere to FedEx policies. Their delivery schedules are sometimes set by FedEx -- especially where commitments have been made to specific pick up and delivery times. FedEx says they are independent, because they can buy and sell their routes and they provide their own equipment, but clearly there is a significant question as to who "controls the work."

As Langley reports, although there is no single formula for measuring control, a worker is likely to be considered an employee "if he or she works set hours, is required to follow instructions on how to do the job, receives training from the employer and works on the employer's premises."

FedEx may well have crossed a line by promising specific pickup or drop-off times to valued customers beyond the service guarantees normally offered by the company. By adhering to these schedules, "independent contractors" may not really be independent. Langley writes that one former driver complained that in his haste to meet the target "he regularly urinated in cups or old bottles in the back of his truck." Yikes! You might want to wear plastic gloves when opening the package!

In California, New Jersey and Montana, courts have determined that Fed Ex's "independent contractors" are in effect employees. These cases are under appeal. Meanwhile, there is a lot of money at stake. Langley writes that in its quarterly report to securities regulators last month, FedEx "disclosed the proceedings over FedEx Ground's "owner-operators" for the first time and warned that they could "result in employment and withholding tax liability for FedEx Ground." It said it couldn't estimate the size of the potential liability."

If the courts do in fact determine that the over 13,000 "independent" drivers are in fact employees, Fed Ex will be required to pay benefits, administer witholding and, most important from our perspective, provide workers' compensation benefits for these people. That would be a lot of payroll and a lot of workers' comp. And it could well be retroactive. I wonder how many independent contractors have been disabled by work-related accidents or injuries in this fast-paced industry. They would surely welcome an opportunity to collect the comp benefits available only to "employees."

We have blogged the intriquing area of "independent contractors" before and we will surely do it again. It's not going away. From our perspective, true independence rightfully requires people to carry their own insurance. Independent contractors, by definition, are not "part of the work team." But this situation appears to involve an area where these contractors waddle like FedEx employee ducks and quack like them, too. If indeed they are "ducks", they deserve all the consideration and benefits of the thousands of people who are currently part of the FedEx team. If, in turn, this becomes a cost of doing business that must be borne by the customers, so be it.

| 2 Comments

2 Comments

I like your conclusion. If this action concludes with Fed Ex being forced to pay retroactive WC, what affect do you think this will have across the country?

I have no idea, but it sure will be interesting to watch! I would guess that a lot of large companies are watching this unfold with considerable anxiety.

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This page contains a single entry by Jon Coppelman published on January 9, 2005 11:46 AM.

Trends and issues at the start of a new year was the previous entry in this blog.

State WC news: RI, HI, CA is the next entry in this blog.

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