10/14/2014 (press release: CAWageHourLaw) // Eric Grover
An appeals court has seen through the corporate smoke screen and ruled that California FedEx drivers were employees, not independent contractors, contrary to FedEx’ creatively written contracts and legal arguments. The decision potentially leaves the company on the hook for possibly up to $300 million dollars in expenses and back pay. That doesn’t include additional taxes the company may also need to pay, adds Eric Grover employment attorney at Keller Grover LLP.
In order to evade labor and employment laws, regulations and taxes, companies have increasingly created structures and mechanisms (like contracting work out to another company or creating contracts) that turned people who should legally be considered employees into so-called independent contractors. As these efforts have become more common, more workers have been filing lawsuits and complaints with state and federal agencies leading courts and regulators to critically examine such relationships.
FedEx and the trucking and delivery industry received a jolt from the U.S. Court of Appeals for the Ninth Circuit which covers California, according to a Forbes article. The court ruled that thousands of “independent contractor” FedEx Ground drivers working between 2000 and 2007 (before FedEx changed their contracting model) were in fact employees.
FedEx Ground drivers in multiple states started filing suits in the early 2000’s, which lead to a consolidated action claiming the company falsely labeled them as independent contractors. Although a district court largely agreed with FedEx, a three-judge panel of the appellate court reversed the ruling. FedEx has appealed the ruling to the full court.
In a previous appeals case from 2009, the Teamsters sought to represent single route drivers but the U.S. Court of Appeals for the D.C. Circuit applied a new and controversial “entrepreneurial test” it had created to look at “opportunity,” not the traditional multi-factor test which looks at who controls the employee’s time and working methods and conditions.
The Ninth Circuit applied the more traditional measure of who has potential control over the means and methods of work. Judge Stephen Trott, a Reagan appointee, quoted Abraham Lincoln in a concurring opinion finding the drivers were employees: “‘If you call a dog’s tail a leg, how many legs does a dog have?’ His answer was, ‘Four. Calling a dog’s tail a leg does not make it a leg.’”
The court found calling drivers “independent contractors” in FedEx’s Operating Agreement does not make it so legally considering the language of entire agreement, the rest of the relevant “common policies and procedures” of their work and California law. The appeals court didn’t agree with the trial court’s use of the new entrepreneurial test.
Many companies have decided to run the legal risks that come with creatively trying to convert employees into independent contractors to save costs (frequently burdening workers with expenses and taxes they shouldn’t have to pay). Many workers, like these FedEx drivers, have become fed up and are standing up for their rights and, depending on the facts and the particular court, are getting decisions in their favor.
The California attorneys at the Oakland wage and hour law firm of Keller Grover have been helping victims of wage theft recover lost wages since 2005. To learn more about wage laws and to find out if you’ve been misclassified by your employer, contact Keller Grover at 888.601. 6939.
To learn more read our previous article: http://www.cawagehourlaw.com/department-of-labor-to-crack-down-on-construction-job-misclassification_67.html
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