Independent contractors
Cases regarding the misclassification of independent contractors are unfolding
throughout the country. The cases involving FedEx are among the most high
profile, which collectively represent more than 27,000 drivers, seeking
reimbursement of all the expenses – including wage and other employment-related
taxes – they've been forced to pay as a result of being misclassified,
a liability that experts estimate exceeds $1 billion. The first summary
judgment was issued in June in Illinois and found that the drivers were
employees because their delivery work was an essential and necessary part
of FedEx's business.
In a separate recently-settled suit, FedEx Ground was cited by the Massachusetts
Attorney General's Office for allegedly violating the state's Independent Contractor
Law by failing to provide a proper pay stub or Workers' Compensation, and by
neglecting to deduct and withhold state income taxes and not paying correct overtime.
Under terms of the settlement, FedEx Ground, which denies liability, has agreed
to pay more than $3 million, including the significant underpayments, back to
Massachusetts' General Fund. Money will also go to the 13 drivers named in the
original citation.
Fraudulent misclassification
The owner of a South Hadley, MA roofing company was indicted by a grand
jury on July 15 for defrauding his insurance company of more than $107,000
in Workers' Compensation premiums by misclassifying his employees.
Allegedly, the owner lied to his insurance company so he could save money
on his Workers' Compensation premiums. The Massachusetts Attorney General
indicated that he put the “health and well-being of his workers at risk
if any of them were ever injured on the job."
An investigation of the roofing company began after the Massachusetts Insurance
Fraud Bureau received a tip from the insurance company regarding the alleged
misclassifications.
The investigators found that over a four-year period between May 2004 and
May 2008, the roofing company owner had allegedly misclassified his workers
as carpenters instead of roofers to avoid paying higher Workers' Compensation
insurance premiums.
After he was notified of the “discrepancy,” the owner allegedly told his
insurance company that he had a carpentry business and that any roofing
was subcontracted to other businesses. The investigators discovered that
the owner had employed full-time roofers since his first policy with the
insurance company in May 2004 and that in doing so, he had defrauded the
insurance company of more than $107,000 in Workers’ Compensation premiums.
A court date for the case has been set for October.