More negative news hit the perennial compliance whipping boy as FedEx agreed to pay $2.3 million to the state of Montana for the improper classification of their delivery drivers as independent contractors. As part of the agreement with the state, Fedex Ground also agreed to change their business model from independent contractors to independent service providers. Breakthrough, right? Well not exactly.
FedEx’ Ground’s business model change to independent service providers will require that providers register with FedEx as independent incorporated businesses. The providers will be responsible for the hiring, training and supervision all of their employees as well as providing unemployment and workers comp insurance. The model that has been proposed is currently being used in Maryland, Tennessee, New Hampshire and Massachusetts, where it recently came into play after a settlement. Unfortunately something that was not promised, was whether FedEx will continue to control their provider’s uniform dress, schedules and their right to work for other companies.
Those that are less jaded than I have probably concluded that FedEx has finally seen the light and decided to change its ways. Don’t count on it. In all of our FedEx reportings throughout the years, FedEx has never accepted any wrongdoing and they sure didn’t bother to start now. Their new business model has been promised to be in place by June 2011 which gives them eight more months to find new loopholes. The state of Montana has also agreed to refrain from interfering in the first six months of FedEx’s migration to their new model.
The last time I checked, financial and behavioral control were still factors in determining whether a worker was an employee. So what if FedEx only deals with independent service providers going forward. Aren’t these providers performing a service that is integral to FedEx Ground’s core business? I get what they’re trying to do by turning it into a corp-to-corp business transaction. Just because the relationship of the parties appears to be legitimate, it doesn’t mean that the other two forms of control are non-existent. Let’s hope that the state of Montana continues to monitor this closely.
