Stopping cold turkey with the use of independent contractors is tough. Just ask FedEx. Recently, FedEx made changes to the way they engage their independent contractor truck drivers. As we've reported here previously, this is in direct response to the independent contractor misclassification issues and litigation that FedEx has been fighting with several states.
But will this be enough to end their misclassification troubles? Probably not. So why doesn't FedEx just stop classifying drivers as independent contractors and be done with it? The short answer is: They can't.
Unfortunately for FedEx, they can't just turn around and convert 12,000 drivers to employees and go on with business as usual. Doing so would be like admitting they've been wrong for years. Instead, they are making small changes by forcing new rules on drivers to attempt to shore up their position on their status as independent contractors. It's not perfect, but it's a start.
This move by FedEx further illustrates the complexity of issues around independent contractors and the mounting pressure the states (and soon, the federal government) are putting on companies using these contractors. It also illustrates the difficulty for companies to transition to proper classification and use of independent contractors.
So, should you just stop using independent contractors? The answer, of course, is no (for several reasons, read on). But, you should eventually end your dependency on loosely defined contracts, headcount-skirting consultants, and self-identified independent contractors who look, work, and report like regular employees.
I have heard of some companies ending their use of independent contractors completely. The irony there is that if they can easily do this without any undue liability, then the independent contractors were probably correctly identified in the first place!
For the rest of you, the answer is probably not that easy. But the message is clear: You need to do something. Simply ending contracts can adversely affect project schedules and productivity, and could actually invite legal action by contractors who believe they should have gotten benefits as employees -- and then were just let go (not fired).
Take a page from FedEx's playbook and be cautious and measured. Talk to legal. Engage an outside company to help you assess your situation. It might take some time, but taking these steps now can help avoid a lot of heartburn and fines later.
Here's a quick test you can perform right now (along with a bonus safety message). Go to any department in your company. (IT is a good place to start.) Call a quick employee meeting to discuss the emergency exits and evacuation procedure. Call a separate meeting for all non-employees and discuss the same thing. Be clear and intentional when inviting everyone.
This will accomplish a few things, including providing an always important safety update. By getting a quick headcount of both groups, you can quickly gauge the extent of the issue you might or might not have. It also forces you and your department managers to figure out who the non-employees are. (Do you have a list or did you simply have to shout over the cubicles?)
It's also a good example and reminder to your managers that non-employees must be treated differently than employees. And last but not least, if you do have a bunch of independent contractors sitting with employees, using your network and computers, working the same hours as employees, then you have a problem.
Check back soon for a look at some of the specific issues FedEx has been facing and what they are trying to do to bolster their case.