Fedex loses another classification case

[upsyo]

http://www.doj.mt.gov/news/releases2010/20101020.asp

ATTORNEY GENERAL STEVE BULLOCK
STATE OF MONTANA

FOR RELEASE: October 20, 2010

Bullock Announces $2.3M Settlement with FedEx Ground

Investigation: FedEx Ground drivers are employees, entitled to basic worker protections
HELENA – Attorney General Steve Bullock announced today that the State of Montana has reached a $2.3 million agreement with FedEx Ground over its failure to pay unemployment insurance on behalf of its drivers, who had been misclassified as independent contractors.
"This is a basic issue of fairness. Every worker in Montana deserves the fundamental protections provided by law, and no employer can deny those protections by misclassifying employees as independent contractors," Bullock said.
The settlement announced today follows a year-long investigation by the Department of Labor and Industry and the Department of Justice which found that drivers are employees of FedEx Ground, and that FedEx Ground therefore owes the State of Montana unemployment taxes, penalties and interest on the drivers' behalf.
FedEx Ground — a subsidiary of the FedEx Corporation — avoided payment of these expenses by classifying drivers as independent contractors, since state law requires payment only for employees, not for independent contractors. As part of the settlement, FedEx Ground has agreed to pay $2.3 million to reimburse Montana for its losses, which includes penalties for failing to withhold income taxes and for misrepresenting employee information in its quarterly reports.
As part of the investigation, the State found that drivers had very little control over their own business, were treated as employees and did not meet the qualifications to be independent contractors under Montana law.
According to the Commissioner of Labor, Keith Kelly, any unemployment insurance coverage already paid by drivers — which should have been paid by FedEx — will be reimbursed directly to drivers. Kelly estimated this process would take six months to complete. The remaining $1.2 million will go directly to the state's general fund. In agreeing to the settlement, FedEx Ground admits no wrongdoing.
As result of the investigation, FedEx will change its business practices in Montana and to engage in good faith negotiations with other states that are concerned about employment classification at FedEx Ground.
"This is a nationwide problem and it deserves a nationwide solution," Bullock added. "I'll continue to work with my colleagues across the country to make sure that FedEx Ground's drivers — and all workers — are provided the rights and protections they deserve."
Over the past year, Bullock has led a multi-state effort to promote compliance with state employment laws. As a result of the settlement announced today, FedEx Ground will implement a new pickup and delivery model in Montana.

 

[Catatonic]

This is encouraging news.

 

[MrFedEx]

This is encouraging news.

Isn't it interesting that FedEx continues to lose these suits. Unfortunately, once the states get their payout, they go ahead and accept the "new and improved" Ground plan.

 

[Catatonic]

Isn't it interesting that FedEx continues to lose these suits. Unfortunately, once the states get their payout, they go ahead and accept the "new and improved" Ground plan.

Could someone explain the "new Ground plan"?

 

[User Name]

last time i checked I never paid anybody money that I didn't owe them. fedex admits no wrongdoing.... LOL

just a matter of time..

 

[upsyo]

better article
http://abcnews.go.com/Business/wirestory?id=11930822&page=1


FedEx Corp. has agreed to pay $2.3 million to settle a dispute with Montana over the classification of its FedEx Ground delivery drivers as independent contractors and not employees, the state attorney general said Wednesday.

FedEx Ground also will change its business model as part of the settlement from 40 independent contractors to an unknown number "independent service providers" who would cover larger regions of the state.

But the company doesn't have to reclassify its drivers as employees, and as little as $100,000 will go to reimburse drivers who had to pay their own unemployment insurance. The vast majority of the settlement money will go into the state's general fund, and reimburse state agencies that are owed unemployment insurance taxes or participated in the audit of FedEx.
It is also unclear whether the new business model will fix the problems Attorney General Steve Bullock raised. "This settlement does not provide any assurance that we won't be back fighting a year from now," Bullock said. "One thing we do know, it's not going to be the degree of control that the state found they've been exercising over these guys the last few years."
FedEx Ground is involved in numerous lawsuits and tax proceedings with states over claims that the drivers the company calls its "owner-operators" should be treated as employees. There have been at least 30 class-action lawsuits filed, the company said in a Security and Exchange Commission filing in August.

FedEx Ground drivers must spend their own money for trucks, repairs, fuel and uniforms but they are subject to FedEx ground rules when it comes to their hours, dress and their ability to contract with anybody else, Bullock said.

The drivers' status as independent contractors means the drivers don't receive worker's compensation or unemployment insurance and aren't covered by labor laws designed to protect workers.

FedEx admits no wrongdoing in the settlement, which spokesman Maury Lane said simply resolves questions related to the independent contractors' tax obligations. "FedEx Ground remains committed to the independent-contractor model," Lane said. However, the company will change its business model to one it is now using in New Hampshire, Maryland, Tennessee and most recently Massachusetts, after a similar settlement was reached this summer with officials in that state.

Independent service providers that contract with FedEx will have to register as independent incorporated businesses and they will be responsible for hiring, training and supervising all their employees. These independent service providers will have to provide unemployment and worker's compensation insurance.

The company's move from independent contractors to independent service providers in Montana will be complete by June 2011, Lane said.

But there are questions as to whether FedEx will retain the same control over the independent service providers and its employees that caused the state to raise the complaint in the first place.
Montana agreed in the settlement not to interfere in the first six months of the new business model. After that period, the company will have to provide the state with documentation the attorney general's office will use to decide if the company is in compliance.
"I don't know what the new model will look like," Bullock said. But "we will continue to be vigilant to make sure that workers get the protection they deserve."

 

[vantexan]

So basically they run as independent contractors for as long as possible until lawsuits force them into the independent service provider model. This apparently satisfies legal requirements, and probably discourages people in some states from suing. Does that about sum it up or am I missing something? Doesn't look like FedEx will make Ground drivers permanent employees, so the big question is how long until they make Express a priority service only? Or will they? When all Ground legal issues are resolved?

 

[Cactus]

So basically they run as independent contractors for as long as possible until lawsuits force them into the independent service provider model. This apparently satisfies legal requirements, and probably discourages people in some states from suing. Does that about sum it up or am I missing something? Doesn't look like FedEx will make Ground drivers permanent employees, so the big question is how long until they make Express a priority service only? Or will they? When all Ground legal issues are resolved?

I see the company going belly up before all Ground legal issues are resolved.

It's that big of a mess.

 

[bbsam]

I see the company going belly up before all Ground legal issues are resolved.

It's that big of a mess.

You could be right in the sense that all companies the size of Fedex have legal issues. However, the classification issue is one that is being resolved. The use of the new ISP model has been ongoing for several years in Vermont and Massachusettes. Odd how only $100,000 of the $2.3 million dollars of the Montana payoff went to compensate contractors. But the public coffers have to be filled somehow, don't they?