You and I don't have the legal staff or money to fight like Fed Ex however your point is a good one:
In 2007, FedEx agreed to pay $26.8 million to settle a decade-long class action lawsuit with 203 drivers who claimed they were misclassified as independent contractors.
To give you an idea of the scope of litigation FedEx Ground is facing, one of these class action lawsuits represents an estimated 27,000 current and former ground-delivery drivers who are seeking nearly $1 billion in damages for back pay, truck purchases, overtime and costs they incurred as contractors, according to a Bloomberg news report.
Fedex Ground hasn’t waited for the courts to produce a final answer. In the seven years since the first lawsuit raised the issue of contractor or employee, the company’s methods have changed - prompted by the lawsuits and its growth. Today, many more of its contractors operate multiple delivery routes, and fewer are single-route drivers. “There is a big difference in the numbers,” said spokesman Bryan Iams. Specific numbers were not available, he said.
Now, every FedEx Ground contractor is required to be incorporated as a small business, treat its drivers as employees, secure workers compensation coverage and unemployment insurance for them, among other requirments, Iams said.
We can do this in our industry also but why? If my crew does all the work and I am basically a franchise of your company why not cut you out and keep my own route.
Speaking of franchises
The court ruled last fall that the Boca Raton, Fla.-based franchisor must pay back the franchise fees over 100 people — mostly new immigrants — paid the company, plus interest and lawsuit costs. The court’s opinion? Privately held Coverall misclassified its employees as franchisees, so their fees should be refunded.
Fed ex is a nationwide system of moving packages with a huge but simple business model. When they drop off a package the client never says by the way can you transplant that bush today? Microsoft also had a similar IC problem and they also settled.
The real question: Is the risk worth it anymore. 10 years "yes"! 20 years ago "yes" Today "not really".
This is one topic that really got my interest a few years back when a lawyer said as long as it is an industry standard practice you are safe. I asked him How would I prove that it is. He said well just ask some of your other business owners to come in a prove they do it also.
So the other question is will you open your books to the IRS to help a friend out? Well the other owners I talked to probably said probably not.
By the way I am not a lawyer or CPA I own a landscape company just like you. Mid size, 23 employees I have been in business over twenty years. I always look for new and interesting this to learn about, this certainly is a hot topic in the service industry.
Over the last 3 years it has been more of the legal side of the business that really intrigues me. 3 years ago a rash of FLSA lawsuits against local landscaping companies came through our area which was the start of my newest hobby. 3 years ago you could barely find anything on this topic. By the way most FLSA cases involve a set weekly or day rate amount, with no over time like an independent contractor status.
Winter is about to start in Chicago so if anyone else has any thoughts on this topic please share them thanks and have a great holiday.