The Steamroller Rolls Closer to FedEx

Today, New York Governor Elliot Spitzer issued an executive order that will greatly enhance the state's ability to identify employers that misclassify its employees as contractors. 

Spitzer's order established a multi-agency task force that will streamline the investigation of illegal classifications by employers and raise public awareness of their rights as employees. 

The Task Force is headed by the Department of Labor which has primary investigatory responsibilities but can also enlist the investigation capabilities and resources of the Attorney General, the Department of Taxation and Revenue and the Workers Compensation Fraud Inspectors General.

"The Teamsters Union applauds Governor Spitzer's commitment to protecting workers who continue to be victims of this corporate scheme to avoid responsibilities to their employees," said Jim Hoffa, Teamsters Union General President.

Workers that are misclassified lose out on many benefits and protections of employment law.  Employers willfully mislabel workers as contractors to avoid payroll costs for withholding taxes and to avoid paying insurance premiums for unemployment or workers compensation policies.

Studies suggest that law-abiding employers and the state are picking up the burden of the employers who misclassify employees. The state funds that provide unemployment and workers' compensation miss out on collecting the full donations of the scofflaw employers. In New York, a 2007 study by Cornell University researchers concluded that the state is lost out on $175 million in unemployment insurance tax revenue between 2002 and 2005 due to misclassification.

Everyone here knows the Teamsters and the drivers are exposing this misclassification scam at FedEx Ground. The National Labor Relations Board has ruled in 6 out of 7 cases since 2000 that FedEx Ground drivers are employees and not contractors. A former driver testified before the U.S. House of Representatives on his experiences in July.  In August, the California Court of Appeal ruled that the FedEx Ground single area drivers are employees. 

"With the new structures in place following Governor Spitzer's order and initiative to crack down hard on employers who misclassify their employees, I will be communicating with the authorities that FedEx Ground should be an immediate target for investigation," Hoffa said. "The independent contractor scam at FedEx has gone on long enough.  I will urge the New York authorities make FedEx an example for other state officials to also thoroughly investigate the FedEx system."

The business press is already starting to pick up on this announcement and what it means for employers who are using this scam.