Both employers and employees should be aware of the recent decisions by federal and state courts finding that Fed Ex drivers were misclassified by Fed Ex as independent contractors, instead of employees. The courts reached their decision by concentrating on whether the employer had the right to exercise control over the manner and means of the drivers’ duties and, whether the employer did in fact exercise such control. The courts deciding on these cases, from the state of California to the DC Circuit Court, all agreed that Fed Ex misclassified the drivers and, accordingly, Fed Ex would be liable for several million dollars in damages as a result of its failure to pay back wages, overtime and, in some cases, the minimum wage to the employees. Fed Ex will also be liable for damages resulting from its failure to properly pay taxes on these employees to the IRS and by failing to provide unemployment insurance to applicable employees.
Despite the fact that these cases have been brought in many different states, as well as in both federal and state courts, the criteria considered by the tribunals for establishing whether a worker is an employee or an independent contractor is generally the same. While each case is different, courts will examine the degree of control the employer had over the worker as well as:
• Whether the worker uses his own tools or supplies or those of the employer
• Whether the worker can realize any profit or loss from his work
• Whether a written contract exists and, if so, what does it say?
• Whether the worker is entitled to any employee-type benefits such as paid vacation leave or a pension plan
• The permanency of the relationship between the worker and the employee
• The degree of independent business organization or operation of the worker
• The amount of initiative and judgment required for the success of the worker
While many of these recent decisions have involved drivers at Fed Ex locations, other cases have involved tech start-up companies in California, umpires providing services at the US Open, newspaper carriers and hardware delivery drivers. This sudden avalanche of cases, in all areas of the country and in all types of businesses, operates as a wake up call to all companies currently utilizing individual contractors in their line of work. With the government investigating claims of misclassification and the courts finding overwhelmingly against the employers in these situations, businesses need to make sure their independent contractors meet the criteria for independent status or the business will face potential liability and damages resulting from the misclassification.
What to Do
If you are an employer in Tennessee and have questions regarding how to classify your workers to avoid the serious tax and legal consequences of misclassification, give the Law Offices of Jill Jensen Thrash a call and we can help you out. Likewise, if you are an employee and believe that you have been improperly classified as an independent contractor, we would also be happy to review your situation and answer any questions you might have. Our goal is to assist our clients in identifying and avoiding potential legal land mines, as well as making sure that you receive all proper compensation owed to you. We are here to help – no matter what side of the desk you are on.