FedEx recently settled a class action lawsuit over the misclassification of California FedEx Ground drivers as independent contractors instead of as employees. FedEx will create a $228 million fund to resolve claims by 2,300 delivery drivers. Some claims date as far back as 2000.

The settlement comes after a 2014 opinion, Alexander v. FedEx, 765 F.3d 981 (9th Cir. 2014), where the Ninth Circuit specifically considered whether FedEx Ground drivers in California were independent contractors or employees. The Court held that the drivers were employees, not independent contractors, because of the high degree of control FedEx exercised over them. Judge Fletcher wrote that the contract between FedEx and the drivers granted FedEx a broad right to control the manner in which drivers’ performed their work. This is the most important factor in the California right-to-control test.  See S.G. Borello & Sons, Inc. v. Department of Industrial Relations, 769 P.2d 399, 404 (Cal.1989). The court noted that FedEx controls virtually every aspect of the drivers’ job: including uniform, grooming habits, appearance of their truck, the specifications of the truck, who the drivers can hire, “suggests” routes for the drivers to take, generally dictates their schedules, trains their drivers, as well as a variety of other matters. To the Court, the issue was not even close.

It may sound like a minor difference, but whether a worker is an employee or an independent contractor has huge implications for a company. If a worker is an employee, the company has to meet a host of obligations, including providing health care coverage, meeting federal and state tax withholding requirements, providing workers’ compensation insurance and unemployment insurance, meeting anti-discrimination laws, and more. The company can avoid many of these legal requirements by hiring an independent contractor instead. However, simply giving a worker the label “independent contractor” is not enough to make the worker an independent contractor. The IRS and other federal and state agencies review a host of factors to determine if a worker is an employee or an independent contractor.

As Alexander illustrates, it is critical for both the business and the worker that a worker be correctly classified as either an employee or an independent contractor. If the company controls what will be done and how it is done, generally the worker is an employee. If the company has the right to control or direct only the result of the work, and not what will be done and how it will be done, the worker is probably an independent contractor.

If a worker is misclassified as an independent contractor, when he or she is actually an employee, the worker has missed a lot of benefits that come with being an employee. The company has also most likely saved money by misclassifying the employee as an independent contractor. If an employer is caught misclassifying an employee, the employer may be subject to civil penalties and other damages.

If you believe that you are an employee, but your employer says you are an independent contractor, you should speak with an employment law attorney. You may be missing out on some valuable benefits to which you are entitled. If you’re in the Oakland-San Francisco area, call Oakland employment law attorney Micha Star Liberty at 510-645-1000 or 415-896-1000. She works with clients in the Oakland-San Francisco area on employment law issues, including the mischaracterization of employees as independent contractors. Companies can be liable for damages, including unpaid benefits, unpaid time off, and more. Call her today to learn more or to schedule your free consultation.

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