Employee Misclassification Receives Increased Attention
The issue of employee misclassification has been in the news a lot in the past few weeks and may hang around for a while longer given the importance of a recent case decided by the Ninth Circuit Court of Appeals. That case involved a suit by more than 2,600 California and Oregon FedEx drivers who argued that they had been purposely misclassified as independent contractors. This technicality was no small matter, but instead meant increased costs for the workers as well as the loss of important benefits and labor protections.
What is misclassification?
Misclassification exists when a worker is given a label, which does not, in reality, apply. The most common example of this is when an employee is improperly referred to as an independent contractor, while that person is actually a normal employee.
What makes an employee?
Employees are those workers whose companies are able to dictate details of how they perform their jobs. This includes the power to mandate uniforms, work hours, billable rates, procedures, etc. Independent contractors should theoretically not be made to comply with the same number of lengthy requirements, but instead operate, as the name implies, independently.
What happened in this case?
In the recent FedEx case before the Ninth Circuit, a group of drivers brought suit after they say FedEx denied them overtime pay and other critical labor protections by misclassifying them as independent contractors. These workers noted that FedEx mandated even the most minute details of their job performance, including when and where to deliver packages, at what time, how to interact with customers, what clothing to wear, how to present themselves and, most bizarrely, how to precisely carry their keys after locking their trucks.
Despite the micromanagement, FedEx labeled these workers independent contractors rather than employees, forcing the workers to pay for their own trucks, buy their own uniforms, purchase company-approved equipment, pay increased taxes and lose out on benefits like unemployment insurance and workers’ compensation coverage.
The judges on the Ninth Circuit ultimately sided with the FedEx drivers and noted that simply labeling a worker as an “independent contractor” does not make it so. The Court found that FedEx had the broad right to control the manner in which its drivers did their work, as a result, they should be categorized as employees rather than independent contractors.
The impact of the case
Experts say that the case will have important ramifications not only for the thousands of drivers working for FedEx, but also for the potentially millions of workers who have been misclassified in an attempt to save companies money. For FedEx, the ruling could mean claims for back wages and benefits that could wind up costing the company hundreds of millions of dollars. As a result, expect to see many more cases filed regarding misclassification in the coming months and years.
Source: “FedEx Refuses to Treat Your Friendly Delivery Guy Like a Real Employee,” by Danny Vinik, published at NewRepublic.com.
Source: “Wage Watch: Court Ruling Could Upend FedEx's Biz Model,” by Claire Zillman, published at Fortune.com
