FedEx dodges a bullet, maybe

Last week a judge in Indiana threw out 20 class-action lawsuits claiming that FedEx drivers were employees and not independent contractors. As a result, FedEx is off the hook for pay and benefits for these drivers -- at least for now.

But is this the end? Probably not. Since the cases dealt with multiple states, there are probably some who will still try to go after FedEx. It also remains to be seen if the federal government can get any money out of them as well.

No matter the outcome, FedEx has likely spent millions of dollars defending their position. Because of the sheer volume of drivers, paying that much in legal fees is still much less than overtime, benefits, and penalties. But to the average company, this is probably a losing proposition.

That's why it's critical to stay vigilant with independent contractor usage. We've written about how the federal government and the states have increased their efforts. It might get even more crazy if FedEx slips through the noose.

Where would you look if you were the state or federal government? I know I would look at companies that use lots of technology. Or public companies that have lots of revenue and a disproportionately low number of employees.

New York went after construction contractors. It's not too difficult to see that they'll probably start with obvious professions, certain industries, and big-name companies.

So here are a few reminders and risky behavior that might put your company under increased scrutiny:

  • Look for poorly classified non-employee labor expenses. Make sure independent contractors are not hiding in project costs or blanket purchase orders.

  • Insist on clear statements of work, and use independent contractors for specific tasks or smaller projects. Work should not be listed as "on-going" or constantly directed by company managers.

  • Have independent contractors work off-site and with their own tools as much as possible. Having them work side-by-side with employees doing the same work is a big red flag.

As the legislation to hold the line on Bush-era tax cuts gets signed by the president, the government is going to be looking for more ways to create income. Initiatives such as reclaiming back taxes on independent contractors are probably going to look pretty attractive in the coming years.

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