FedEx Drivers Deliver Class Action Suit

FedEx has a little more to deal with this season than holiday deliveries: it has been deflecting claims in multiple jurisdictions over its classification of drivers as independent contractors rather than employees.

The tax implications are pretty easy to figure out: back taxes (FICA and with holding), penalties and interest.

But what about those misclassified employees? What happens to them? Do they simply refile and go away? Of course not, it’s not that simple.

On October, 2007, Chief Judge Robert L. Miller of the Northern District of Indiana certified a nationwide class of more than 20,000 current and former drivers who brought suit under ERISA (Employee Retirement Income Security Act). Those drivers are now seeking benefits under several FedEx plans for which they were not eligible because they were considered independent contractors. Multiple claims exist in other jurisdiction on similar grounds.

FedEx has a reason to be worried. Last month, the California Supreme Court rejected FedEx’s appeal of court finding that single-route drivers were employees rather than independent contractors. Of course, those drivers had signed an agreement claiming that they were “independent contractors” but saying that it’s so doesn’t make it so. The court found that FedEx exerted a considerable amount of control over the drivers, and thus, classified them as employees for purposes of the litigation (the IRS is no doubt watching).

This is likely the first in a series of similar waves of litigation involving benefits and pay incentives which are owed to employees but not paid to independent contractors. Despite signing agreements and being called independent contractors, many workers are now realizing that the scale of their duties under these agreements really makes them employees. As such, in addition to tax with holding and other tax-related issues, they may be entitled to benefits such as retirement plans, health insurance coverage, reimbursement for work-related expenses and more. These kinds of lawsuits can be lengthy, expensive and, in some cases, very public.

Blackwater, are you paying attention?

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