Employee misclassification lawsuits involving FedEx and its Ground and Home Delivery drivers have led to an expensive settlement for FedEx. On June 15th, FedEx announced plans to settle the remainder of these IC class action lawsuits for a sum of $240 million. All in all, this will lead to a total of $466 million paid by FedEx to resolve misclassification claims.
As with most of IC lawsuits, the issue of concern here was the relationship that FedEx has with its delivery drivers. The delivery drivers are clearly documented as independent contractors, but their working business relationship was far more reminiscent of an employee relationship. The contracts indicated that the drivers were given employment constraints, which granted FedEx absolute control over the drivers. Three courts determined that the delivery drivers were misclassified employees, and FedEx’s misclassification has culminated in the aforementioned costly settlements.
FedEx made two key mistakes with their independent contractor business model that led them to this point. First, their IC contracts removed rights from their independent contractors, which rights they should have retained. Second, their actual IC business relationships did not accurately represent the terms of their contracts. Their documentation may have appeared largely compliant, but these three courts determined that the structure and implementation of their IC relationships was not compliant.
Without proper documentation, structuring, and implementing a legally compliant business relationship with your ICs, you needlessly expose your business to the risk of expensive legal consequences. The operative word here is “needlessly” because this kind of situation can be avoided entirely. The best thing that you can do for your business is to document, structure, and implement your IC relationships so that all are entirely consistent and compliant with current legal regulations.
As independent contractor laws vary significantly from state to state, you need to ensure that your business is compliant with the laws in all the states in which your business operates. For example, if you run a courier or transportation business, your IC business model must comply with all rules and regulations in every state in which your delivery drivers operate. Consultech is highly experienced in assisting businesses in this manner. Our experts can help you restructure your business model, create new and compliant documentation, and implement legal IC relationships so that you can minimize your risk of costly misclassification lawsuits.
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