Misclassifying workers as independent contractors is illegal. After years and years of this scam model at FedEx, the Internal Revenue Service last week slapped the company with a $319 million fine, determining that FedEx Ground workers were, in fact, employees; something the Teamsters have said for a long time!

 

In another blog on the misclassification of FedEx workers posted October 25th, we mentioned that if you are told what to wear, when to show up for work, and when you can take off from the job, you are misclassified. If, like in the FedEx model, you are forced to buy a company-approved truck, stick to their routes, work their hours, wear their uniforms ... well, most of us would call you an employee. When the company calls that worker an independent contractor, it is a scam and it is against the law.

 

“It’s a fundamental fact that FedEx has been skirting the law, and the Teamsters welcome the IRS decision,” said Teamsters General President Jim Hoffa in a statement.

 

On Thursday of last week the FedEx publicly acknowledged that regulatory and legal challenges on misclassification could hurt its stock price. “FedEx Ground anticipates continuing challenges in its relationships with it contractors, which are expected to increase the cost of operations, and it’s reasonably possible that such cost increases could be material,” the company said in its quarterly earnings statement.

 

As President Hoffa said, “It’s game over for FedEx’s independent contract scam.”

 

There are lawsuits in more than 20 states against FedEx by drivers in its ground-shipments unit. These lawsuits, coupled with the fact that the $319 million IRS fine only covers 2002, means that the company will probably face many other penalties. Once the IRS is done with its investigation of the company, FedEx can be looking at more than a billion dollars in fines – so much for their misclassification business model.