We have been tracking the fortunes of FedEx, the ubiquitous delivery service that relies on the services of 17,000 "independent contractors" to deliver the goods. They tout their entrepreneurial strategy as a legitimate alternative to traditional employment. Indeed, when you put UPS and FedEx side by side (which Braun Consulting has done here), you are confronted with two polar views of the delivery business. UPS expects to build loyalty and commitment by hiring their drivers as employees and providing full benefits. Their drivers are union members with annual salaries capping out around $70,000. On the other hand, FedEx depends upon the energy and initiative of "independent contractors" to perform very similar work. These "independents" receive no benefits and must provide their own trucks. However, with prime delivery routes they might pull down as much as $100,000 per year.
"Independent Contractors" in Massachusetts
FedEx managers would do well to read the Massachusetts's Attorney General's advisory on independent contractors (see our February 28, 2005 blog). FedEx lost their case for independence in California and they appear doomed to a similar fate in Massachusetts. The AG's advisory on Independent Contractors states that in order for a contractor to be independent, they must be "free from the control and direction" of the general contractor. With FedEx providing uniforms, logos and delivery routes, it will be difficult to demonstrate true independence on the part of the drivers. Even more compelling, FedEx must prove that the work performed by the independent contractor drivers is different from that performed by the general contractor. Given that FedEx's only business is delivery and the "independent contractors" are delivering the goods, there is simply no way they can get past this one.
FedEx is upfront and proud of its strategy. Theirs is an "in your face" defiance of traditional views on independent contractors. They have undoubtedly set aside a huge stash for legal fees to fight a state by state war of attrition. We are humbly suggesting that the reserve a goodly portion of those legal funds for the Bay State. Indeed, a court loss in Massachusetts opens the door to all kinds of employment law violations, up to and including large fines and even jail terms.
Meanwhile, the AG's ruling on independent contractors has come under new scrutiny for its unintended consequences. If you follow the language of the advisory, you find that part-time bookkeepers, attorneys, auditors, health care professionals and the like may fall under the definition of employees, and thus may be able to sue their clients for violations of a variety of employment related laws. Far fetched? Perhaps. But I have a vision of court documents winging their way through the streets of Metro Boston, many of them delivered with timeliness and aplomb by the uniformed and "independent" drivers of the FedEx corporation.