Independent contractor no more?

[TeamCaffee]

[FONT=&quot]This has to be hitting these guys like a hammer. I wonder if down the road this kind of thing will affect all of us independent contractors.
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[FONT=&quot]OOIDA’s Land line: FedEx tells independent contractors to make business change or leave[/FONT]
[FONT=&quot]Nearly 12,000 independent contractors for FedEx Ground, including many OOIDA members, are still reeling from the company’s recent news that they must comply with new business standards or lose their contracts.[/FONT]
[FONT=&quot]On May 20, FedEx President and Chief Executive Officer David F. Rebholz sent a letter to all of FedEx’s independent contractors stating the company will only contract with entities that “are corporations established under state law and not, for example, an LLC, LLP or sole proprietorship.” They will also have to be “in good standing with the state(s) in which they do business and classify personnel who provide services for them as employees.[/FONT]
[FONT=&quot]Independent contractors leased to FedEx have 180 days, beginning May 20, to “satisfy the standards” outlined in the letter. [/FONT]
[FONT=&quot]One OOIDA member, who didn’t want to be named because she is currently leased to FedEx, said she was caught off guard by the news. She hasn’t made up her mind yet whether she will file for corporation status. She already has an LLC set up for her business and said she isn’t sure whether it will be cost effective for her small business to comply with the new contracting standards.[/FONT]
[FONT=&quot]“I think all of us are a little taken aback by this news,” she said. “We want to make the best decisions for our businesses and that, of course, includes making money, so I need to find out more information before I decide. There is just so much to read and understand.”[/FONT]
[FONT=&quot]According to the FedEx letter, the company’s decision to implement these requirements is “in response to recent concerns by several states” regarding the classification of its independent contractors. [/FONT]
[FONT=&quot]According to its August 2009 quarterly report to the Securities and Exchange Commission, FedEx Ground is “involved in approximately 50 class-action lawsuits, including 29 that have been certified as class actions, several individual lawsuits and approximately 40 state tax and other administrative proceedings that claim the company’s owner-operators should be treated as employees, rather than independent contractors.”[/FONT]
[FONT=&quot]In that report, FedEx outlined that “adverse determinations in these matters could, among other things, entitle certain of our contractors and their drivers to the reimbursement of certain expenses and to the benefit of wage-and-hour laws and result in employment and withholding tax and benefit liability for FedEx Ground, and could result in changes to the independent contractor status of FedEx Ground’s owner-operators.”[/FONT]
[FONT=&quot]– By Clarissa Kell-Holland, staff writer[/FONT][FONT=&quot]
[email protected][/FONT]

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[davekc]

I knew making you guys wearing the purple/green shirts would catch up to you guys.

 

[Lawrence]

This has to be hitting these guys like a hammer. I wonder if down the road this kind of thing will affect all of us independent contractors.

I don't think so Linda. Not even close.

They have always pushed the letter of the law. FedEx Custom Critical has a great executive heritage that is 100% different than FedEx Ground (Roadway Package System). In 1986 - I was one of RPS's first hires in their new Cincinnati Terminal. They looked at "Independent Contractors" very differently - they had issues with labor within 90 days of their grand opening.

I would be very surprised if they would be in the same boat as Ground.

 

[BillChaffey]

Isin't a Limited Liability Corporation, or a Sub Chapter S Corporation. Coroporations in the eyes of the State they are registered in?.

 

[chefdennis]

My son in-law sold his home delivery routes because of the multiple new demands from Fed Corp.....he felt it just wasn't worth the the B/S anymore...so he sold and now is invested in expediting ( owner, not driver) and is also running a tanker. So i guess the B/S must have been way over the top...

 

[Wolfeman68]

"They will also have to be “in good standing with the state(s) in which they do business and classify personnel who provide services for them as employees."

This sounds a whole lot like the bill that is presently in the Senate, S.2882, that is worded to remove section 530 of the IRS tax law concerning classification of "Independent Contractors" In effect, it will transfer the burden of proof from the IRS and place it on the individual to prove "Independent Contractor" status.

The bill is sponsered by Sen, John Kerry and co-sponsored by Sen. Sherrod Brown who just so happens to be my Senator from Ohio. The word on the bill is that since IC's are issued 1099 forms, that are not issued until the end of the year, the IRS has no clear idea of the tax revenue due until returns are filed. Sure, you are supposed to send quarterly tax payments that are estimates of your liability, but not everyone does that. In short, the government wants is money faster. The big issue is that as IC's that have drivers leasing their truck will have to classify that driver as an employee and deduct Fed, State, Local, and FICA taxes from their revenue. This is as it relates to Expedite.

The bill has several supporters including, most notably, the ATA as it would eliminate a lot of their competition from O/O's and IC's. It would drive me out of business as it would become a nightmare trying to keep drivers, and it would triple the accounting end of my business.

I wrote my wonderful Senator explaining how this could drive many small business owners out of business, why the ATA is backing it, and I made it plain that when he comes up for re-election, that I would do all that I could to make sure he stays at home in Ohio rather than in his plush diggs in DC. Not that it would worry him.

Below is his reply to me. Typical politician B/S which is what I expected. I'm sure OOIDA knows about the bill, but I haven't read anything in Landline about it.



Thank you for sharing your thoughts about the Taxpayer Responsibility, Accountability, and Consistency Act of 2009.

On December 15th of 2009, Senator John Kerry introduced S.2882, the Taxpayer Responsibility, Accountability, and Consistency Act of 2009. This bill would modify the rules relating to the treatment of individuals as independent contractors or employees to shift the burden of proof of independent contractor status from the IRS to the individual. It would also increase the penalties for incorrect information reporting.

As Congress further examines these issues, I will keep your concerns in mind. I appreciate your advocacy on this issue.

Sincerely,

Sherrod Brown
United States Senator

 

[ATeam]

[FONT=&quot]This has to be hitting these guys like a hammer. I wonder if down the road this kind of thing will affect all of us independent contractors.[/FONT]

It's a good question to ask and your guess is as good as anyone's. One thing is clear. FedEx Ground, and presumably FedEx Corporation will make significant changes to prevent a union from getting a toe hold in the company.

 

[moose]

This is just one more step for big O'l corporate America banding over asking for more from the Gov. in what used to be the best capitalized free economy in the world ...
1st goe's FX...then we take Berlin ...& the whole trucking industry...(or did we let them gov's do it to port IC or not...)
OOIDA membership should be mandated for CDL renewals .
wanna bet a flush of IC to hit the tractors/van Expedite industry soon ?

 

[davekc]

Worse case for fleet owners would be a replacement of a drivers contract with that of a reoccurring truck lease/management services contract. Drivers could incorporate or whatever and that would eliminate any issues in that current bill if it was to pass as written. This is currently in practice in several businesses.

 

[Vinnie T]

It's all fun and games...but soon this will be upon all of the independants and the companies that have owner op fleets. Fed Ex is just trying not to get caught with their pants down when Fedzilla starts forcing this on everyone in the industry. Between CSA 2010 and this issue the Feds are trying to create a revenue source but in over regulating the safest drivers on the road is going to drive up the costs of goods across the board. If we are all forced to be company drivers, get our own authority and become corporations and essentially force the industry to put teams in every truck to make any money....transportation costs are going to skyrocket anf affect an already shaky economy.

What a mess!

 

[Dakota]

I don't think so Linda. Not even close.

They have always pushed the letter of the law. FedEx Custom Critical has a great executive heritage that is 100% different than FedEx Ground (Roadway Package System). In 1986 - I was one of RPS's first hires in their new Cincinnati Terminal. They looked at "Independent Contractors" very differently - they had issues with labor within 90 days of their grand opening.

I would be very surprised if they would be in the same boat as Ground.

I agree, Ground/Home Delivery treats their contractors like employees. This is one reason I left after the first year.
Custom Critical you have to right to take or not take a delivery, you have the right to work your own hours, this is not the case in the Ground world. If you want a day off you have to have a Fedex Ground approved driver that has been through the 3 to 5 day training, what part timer is going to go to this training unpaid? Just to work a day here or there. They got rid of my temp driver due to one minor accident, without even discussing it with me, I was the one paying him not them. I could go on, but won't LOL

 

[Brisco]

I wonder if this has anything to with the huge class action "are they drivers or employees" (Ground Contractors) lawsuit Fedex lost in the California Courts some years back.

FedEx Drivers Lawsuit

Years ago when FedEx Ground first started up here in the DFW area, I went to one of their "Seminars". After being "self employed" for many years running for 3PL Freight Forwarders, I knew the ins and outs as to what the differences were between a "Contractor" and an "Employee", even what the IRS looked for in filings from people who got paid on a 1099 Basis. The "FedEx" people (mostly minorities) that were giving these seminars were relaying false information when it came to certain tax codes, certain requirements that had to be met with the filings of your taxes as a "1099 Contractor", as well as what the employment laws were when working as a "Contractor" vs being an "Employee".

Of course, I was the one sitting up in the front row asking question after question. (You know the one - Sheeeez, would he just shut up so I can sign up and start making money!!) I had more "correct" answers than the ones giving the seminar. Needless to say, after months of getting the run around from FedEx people in Memphis over what my concerns were with the business practices they were bringing forth, I decided against giving "FedEx Ground" a try. (They probably wouldn't have offered me work anyway. )

Ever since, all I have heard is HORROR stories from ex-Ground Contractors all over the DFW Metroplex. Used to be a running joke around here amongst the used car dealers that mainly dealt with "light commercial" types of trucks and vans. They would advertise low mileage Ford/Chevrolet 12ft Spartan Vans - Ex FedEx Truck and say something like "barely used and as new as a French Rifle from WW2".

 

[greg334]

Linda, kind of jumping the gun there?

Independent contractor no more?

Not quite.

It's funny, this was talked about when I left and now it is all coming to be a fact.

No biggy, when you realize that all this does is takes the sole proprietorship (DBAs) out of the equation and just reinforces the need to deal business to business.

It is a lot like IT contracting services. Nobody in their right mind contracts directly with a person to do IT work, it was done through a business entity, like a corporation, so there is a bit of protection from Employee/contractor issues.

The fleet driver will have the contract with the fleet owner who has the contract with the carrier. The 'independent contractor' will be his own fleet and that fleet will be contracted to FedEx.

Will this come to CC?

I would think yes it would be company wide. Seeing that they, FedEx thinks in terms of a large business, they would have to make uniformed policies across the board to mitigate the risks involved with similar the labor issues like they have had.

Will this change things for you?

Nope I don't think it will.

 

[Jefferson3000]

Well, when you have contractors making demands that they deserve employee style benefits (while still retaining control over hring drivers, and buying/selling routes), you're bound to have this kind of backlash. The answer is: Only do business corp to corp. Some contractors just need a special reminder that they are a small business.

 

[nightcreacher]

Being private contractor is pushing a gray area and always has.Roberts was always very careful about that gray area.
Custom Critical,follows the Roberts way.Ground being on private contractor status has been very shaky for years,from the mandatory white trucks to having to be in uniform.

 

[greg334]

Steve,
I have gone through seminars, been in court and so on with issues over contractors and not once have I ever seen having a specific tool or a uniform that present the contractor as part of the brand or company as an issue over possibly being an employee.

Many think independent contractors are autonomous to do the job that they are contracted to do but in our case they are contracted to represent the company and in doing so they must also represent the brand and follow any internal procedures and decisions that does not affect them to do the actual work.

They are hired to provide capacity and/or skills to operate commercial vehicles safety while within the law in order to produce revenue. This is to service the company's customer, nothing else.

Requiring them to put on a uniform is not anywhere near a questionable issues but telling them how to drive is (for example telling when to take breaks and when not to).

Requiring them to pass safety tests, having a hazmat endorsement or maintain a white truck isn't but having them judge the contractor's performance through acceptance rates and in service time may be.

 

[Turtle]

Under the common-law doctrine of respondeat superior, the employer is liable for the injuries caused by an employee who is working within the scope of his employment relationship. The Restatement (Second) of Torts gives few exceptions to the rule, including independent contractor status. For example, the hiring party (your carrier) may be liable when, owing to its failure to exercise reasonable care to retain a competent and careful contractor (you), a third party is physically harmed. So, if your carrier knowingly leases on a high risk contractor, or allows a contractor to operate in an unsafe manner, like driving too long without a break or driving while tired, the carrier could be (almost certainly would be) liable for your actions if someone else is injured or killed in an accident.

Consruction, taxi, trucking and the computer industry are the big four areas where misclassification of employee status most often occurs. The IRS has several criteria for establishing independent contractor status, including the control of behavior. Normally this is thought to mean "ways and means" of accomplishing a contracted task, but it is much broader than that. Any behavioral control much beyond that of safety is crossing the line. Mandatory uniforms is behavioral control, and has been listed as one of many reasons that FedEx and others have lost court cases. Of course, businesses want to be able to have independent contractors and treat them like employees, because it gets the employer out of having to abide by certain employee protections under the law, not to mention they can get out of paying a snotload of taxes that way.

FedEx is moving to a B2B contractor model with Ground because they can see the writing on the wall. Eventually, when they see there aren't enough actual individual corporations of individual trucks (or enough of those willing to convert their LLC to a corporation) to sustain their brand and service the customer, they will almost certainly end up having to reclassify drivers as employees, or start selling off Ground assets.

 

[DaWhale]

How does the contract that FedEx offers independent contractors define your relationship?

What or how is the independent contractors duty to defend FedEx as well as their customer? Does it pass through to you and your insurance carrier?

Is FedEx an "example" like WalMart?

Recent legislation mandates that all 1099 income is subject to backup withholding. Can you say, pay me now when your funds are disbursed as opposed to annually?

Most independent contractors, favor an LLC because of the favored distribution of income or single taxation.

No doubt about it, tax dollars and collection. That's the bottom line, whether it's an independent contractor as an LLC or corporation. That's why the IRS has their eye on FedEx.

FedEx or any other employer would much prefer to have contractors not employees; you can blame that on the lack of tort reform both from an employee and liability viewpoint.