October 22nd, 2010
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.
Posted in Case Studies, Employee Classification, Misclassification | No Comments »
October 1st, 2010
I’m sure that some professional wrestlers wanted to give the proverbial “what took you so long” body slam to officials from the state of Connecticut. You see, all of a sudden the state of Connecticut is going to examine whether or not the WWE appropriately classified their wrestlers as independent contractors. Yes, the same wrestlers that have their uniforms controlled, prohibited from working for other companies and schedules managed by WWE.
Now let me disclose that it wasn’t a complete out of the blue moment by the state of Connecticut that led them to the WWE . Without taking this entry down a different path, let’s start by saying that politics were definitely at work. Is it a coincidence that the former CEO of the WWE is in a heated race for Connecticut’s senate seat.? And that the challenger happens to be the Attorney General of Connecticut ,who earlier this year announced crackdowns on companies that misclassify workers.
Political whistle blower or not, the WWE would have run into this at some time or another. Unfortunately any potential wrongdoings of the former CEO were going to be spotlighted in a tight senate race. It’s the nature of the political beast. With independent contractor laws becoming more stringent, it would be difficult to support a state’s push to crackdown on independent contractor usage if it’s own Senator was guilty of misclassification. Is Connecticut really in favor of cracking down on misclassification or is worker misclassification merely a small piece of the big political game?
Posted in 1099 Vs. Employee, Government | No Comments »
July 21st, 2010
Lat Thursday, the Attorney General for Massachusetts announced that FedEx had agreed to pay $3 million dollars for misclassifying drivers as independent contractors. Worker misclassification has been problematic for the delivery company whose business model appears to classify a majority of their drivers, and what most people consider employees, independent contractors.
Fedex’s latest news maker is somewhat surprising since they’ve backed their business model all along. Now all of a sudden they decide to shell out $3 million! Who is this delivery company and what have you done to the old FedEx? Now, before we take notice of FedEx’s “noble” actions, I can’t help but think that maybe this was a ploy to soften up Massachusetts and the 13 drivers who have filed suit against them. If this was FedEx’s plan all along, they greatly undervalued their payout. The 13 drivers involved in the suit have indicated that they no intention of easing up but instead will continue with their lawsuit.
Though have not heard the last of this Massachusetts – FedEx tangle. I can’t but help wonder if the $3million payment will hurt FedEx’s case as the lawsuit continues. As usual, a FedEx spokesperson continued to deny the company’s liability and stated that FedEx was merely trying to settle the dispute. Was it a guilty conscience? Hardly. The payout is a drop in the hat for a company that has a cost advantage of up to 30% on it’s major competitor, UPS. Whatever the reasoning for the payout, the bigger question is will this have any bearing on the class action suit taking place in Indiana. Stay tuned.
Posted in Case Studies, Misclassification, Settlement | No Comments »
