crossposted from unbossed
FedEx drivers have been fighting to be classified correctly as employees rather than incorrectly as independent contractors. It’s a fight that has gone on for nearly a decade. And it’s a fight that has been turning in their favor since last August. And now there is more good news. The IRS is weighing in on the side of the FedEx drivers to the tune of billions of dollars. That’s a lot of zeros for a group of workers whose employer treated them like nothings.
Why does how a worker is classified matter?
First, why does it matter how a worker is classified - employee or independent contractor? Answering that would take a lot of space here and detract from the main story. Fortunately, I've already written about this issue, including in prior posts about FedEx which are listed below. Here is a post that focuses more on this issue.
This one, not only discusses new legislation, it includes information about the subject and links to studies that show the negative impact of being improperly classified as an independent contractor.
Friday, May 11, 2007 Congress asks: Employee or Independent Contractor?
In addition to the economic impacts discussed in that post, only employees are protected by workplace laws. A major reason for misclassification is for employers to write themselves out of the law.
This has a public impact. Employees who are improperly classified as independent contractors are less likely to blow the whistle on health and safety issues.
Sunday, August 12, 2007 Independent Contractors and Workplace Safety
Background information on the FedEx independent contractor issue
Now, here are prior posts with information related to efforts by FedEx employees who have been improperly classified as independent contractors.
Sunday, August 19, 2007 FedEx and Its So-Called Independent Contractors
Saturday, October 13, 2007 The drivers have been F****ed
Saturday, October 20, 2007 Last Week in FedEx News
The latest development - The IRS gets into the act
And to bring you up to date, let’s take a look at what is on Fed-Ex Watch
Why, it’s a story announcing that the IRS will be auditing FedEx.
IRS Audits FedEx Ground, Penalties Assessed at $319 MILLION for 2002
From FDX Corp’s 10-K of December 21, 2007:
"On December 20, 2007, the Internal Revenue Service informed us that its audit team had concluded an audit for the 2002 calendar year regarding the classification of owner-operators at FedEx Ground. The IRS has tentatively concluded, subject to further discussion with us, that FedEx Ground’s pick-up-and-delivery owner-operators should be reclassified as employees for federal employment tax purposes. The IRS has indicated that it anticipates assessing tax and penalties of $319 million plus interest for 2002. Similar issues are under audit by the IRS for calendar years 2004 through 2006. We believe that we have strong defenses to the IRS’s tentative assessment and will vigorously defend our position, as we continue to believe that FedEx Ground’s owner-operators are independent contractors. Given the preliminary status of this matter, we cannot yet determine the amount or a reasonable range of potential loss. However, we do not believe that any loss is probable."
Here is the lawyers’ press release announcing this new victory.
<div style="text-align: center">Lawyers for Drivers Say FedEx May Owe $1 Billion in Back Taxes in Wake of IRS Ruling
IRS fines company $319 Million; joins others in finding drivers are employees, not contractors
</div>
WASHINGTON, Dec. 22 PRNewswire -- The U.S. Internal Revenue Service delivered the latest massive blow -- which could wind up costing upwards of $1 billion -- to FedEx's scheme of misclassifying thousands of Ground and Home Delivery drivers as independent contractors rather than employees, lawyers for the drivers said today.
FedEx disclosed the IRS decision, including the $319 million levy in fines and penalties, in its most recent filing with the Securities and Exchange Commission (SEC). It also revealed that while the decision only involves the tax year 2002, the IRS is looking at subsequent tax years. It is likely that the IRS assessment will top $1 billion after more recent years are added to the 2002 tally. The IRS ruling came during a week in which the Massachusetts Attorney General issued an opinion stating that FedEx ground/home delivery drivers in that state should be reclassified as employees and fined the company $190,000 in penalties. Its investigation continues.
FedEx's practice of avoiding tax liabilities and foisting its operating costs onto its drivers has been under continuous attack at the state and federal level for several years. The IRS and the Massachusetts rulings are just the latest.
Class-actions lawsuits by drivers who have been victimized by FedEx's practices have been multiplying across the country. Over 50 suits have been consolidated already in federal court in South Bend, Indiana. Lynn Rossman Faris, Esq., a lead counsel for the drivers in these actions said, "The IRS decision is another milestone in this long battle. It is wholly justified and totally consistent with every thorough investigation of the FedEx "independent contractor" model. The IRS action is further validation that FedEx has been perpetuating a sham to conceal the fact that the drivers are actually FedEx employees who have been exploited to the huge monetary benefit of the company."
Faris added, "The drivers have been shouldering FedEx's tax burden for far too long. We hope that the government continues to vigorously pursue justice for the drivers, all American taxpayers and responsible employers."
The continuing spate of legal setbacks for FedEx accelerated last month when the California Supreme Court had the final word in the landmark Estrada vs. FedEx Ground case, upholding the Appeals Court finding that the drivers were misclassified and setting the stage for reimbursement of significant, wide-ranging business expenses to the drivers. In its oft-quoted opinion, the appellate court said, "The essence of the trial court's statement of decision is that if it looks like a duck, walks like a duck, swims like a duck and quacks like a duck, it is a duck."
Consistent with rulings by the IRS, Massachusetts and California are a growing number of state and federal agencies, such as the National Labor Relations Board, which have found the drivers