FedEx independent contractor classification has turned into an agreement to pay $240 million to settle lawsuits brought by their drivers in 20 states, putting to rest a long legal dispute over whether they were FedEx employees or their independent contractors.
FedEx disclosed in March that it had reached settlement agreements in 19 cases totaling $204 million. The $240 million figure announced on Thursday includes a separate settlement in Kansas. Affecting over 13,000 drivers, the settlement will be official, once it receives a required final court approval. But, this isn’t their first rodeo. In June of 2015 a similar case was settled with California drivers for $228 million and there have been others over the years.
How did this happen?
FedEx is a big company with lots of money. Could they not afford smart attorneys to advise them in such serious matters?
Well of course they could. So, the real question is: Were they ill advised or did they choose to roll the dice and ignore good advice in favor of a possible savings on employment costs? I can’t speak for FedEx, but the answer seems somewhat apparent. Perhaps they decided the savings over time would outweigh the cost of “doing it right”. If that was their line of thinking, they would not be the first company to think this way and probably will not be the last.
FedEx formerly hired drivers as independent contractors. Drivers across the country sued the company, arguing they were actually employees entitled to benefits. The company changed this illegal practice back in 2011. when it ceased hiring drivers directly and began contracting with companies that employ drivers.
What can small businesses learn from FedEx?
- Choose the mindset “Obedience to the law is not optional in our organization.”
- Seek out credible advisers.
- Double or even triple check the advice you get.
- Do not take the answer that “tickles your ears”.
- Write solid policies and standard operating procedures.
- Train all workers.
- Perform internal audits and correct as errors are found.
When employers follow these 7 steps, “good faith” efforts to obey the law will be obvious to auditors or investigators. Even if you are found to be “doing it wrong”, your efforts to do things per the law will pave the way for lesser penalties and you will “be audit-secure”.
Until Next Time, Be Audit-Secure!