Second IRS Determination for FedEx Ground Driver as Employee
The hard-working legal team representing the drivers in the multi-district litigation against FedEx Ground sent out a revised press release on June 20. We now learn from the lawyers that there are two - count 'em 1 and 2 - drivers that have received final determinations from the IRS that the drivers were in fact employees and not "contractors." Here are the revised paragraphs from the later press release from Lynn Faris.
The Internal Revenue Service has reaffirmed its earlier decisions that two FedEx Ground drivers, one in Wisconsin the other in Missouri, were employees of the company and not independent contractors, as FedEx claimed. As a result, the drivers should have not been liable for Social Security and other employment taxes the government requires a true independent contractor pay, according to the final decisions in both cases the IRS issued July 12.
The cases involving former Wisconsin driver Sharon Pagels and Florissant, Missouri driver Rolando C. Thomas focus on the issue of worker status classification and the IRS Form S-88 filing. The decisions could have far reaching consequences for the company, according to Lynn Rossman Faris, Esq., the Oakland, California-based attorney who is lead counsel nationally in the 35 consolidated cases challenging FedEx's claim that its drivers are independent contractors.
We're still waiting for some reporter to ask the FedEx mouthpieces about those so-called "100 cases." Reporters need to find out what carries more weight in the ongoing litigation: two IRS determinations from 2006 or a South Carolina Human Affairs Commision decision from January 1991?
-- July 21
Can FedEx Ground Survive?
We're not the only one's asking ourselves that question.
A publication called State Tax Notes, one of the specialty online reports for tax lawyers, recently did an article on the contractor scam at FedEx titled "Tax Troubles for FedEx Ground?" The article is behind a for-fee firewall but clips from of it found their way to us.
In a concluding section called "Can FedEx Ground Survive", the authors write:
One reason FedEx Ground has been so successful in its competition with UPS is that it cut costs by classifying many of its drivers as independent contractors. Because a ruling from the California Unemployment Insurance Appeals Board will likely require FedEx Ground to change that classification, there is a question about whether the delivery company can survive. If it does, will the cost of payroll taxes, insurance, and benefits be passed on to consumers in the form of higher prices? Only time will tell. One attorney involved in the California class-action suit believes the judgment in the suit could cost FedEx Ground more than $200 million a year. Although that would be unfortunate for FedEx Ground, there are some upsides for the rest of us. First, FedEx Ground's massive profits appear to have been greatly enhanced through the company's improper use of so-called contractors. Second, from a tax standpoint, income tax compliance for contractors and other "sole proprietors" is considerably lower than that for regular employees. Classifying employees as contractors exacerbates that problem.
That is not to say that using contract employees is not a legitimate business model. However, what FedEx has been doing appears to be illegitimate because it combines the benefits of having employees with the benefits of using independent contractors. In sum, FedEx Ground likely has a decision to make. It can either continue to operate as is and pay payroll taxes, unemployment taxes, expenses, and benefits for its employees, or it can loosen up on the control it has over its drivers. Because the latter would likely include ending its delivery scheduling practice, that might not be feasible. Regardless of what the company decides, the California action is almost certain to hurt FedEx Ground's bottom line.
This article from State Tax Notes will not only be read by tax professionals, but also by state tax revenue agencies around the country. Perhaps the tax man elsewhere will be visiting FedEx Ground. Soon.
-- July 18
ANNOUNCEMENT TO ALL FEDEXWATCHERS
The FedExWatch.com web site recently had a major malfunction that caused registered user information to be erased from our system. The registration information was erased so no personal data has fallen into the wrong hands. There was simply a computer coding issue.
Users who registered on FedExWatch Version 2.0 since May 15 are asked to register again. Registration allows us to keep in touch with you and keep you informed about the growing movement of FedEx workers and Teamsters.
Thanks for taking the time to fill out the registration form.
-- July 14
Another CA Ground Driver fights and wins
All of the propaganda that FedEx can afford can't erase the fact that when a driver says "Enough!" and stands up for his rights, the driver wins and FedEx loses.
FedEx can cite the "100 cases" from their cherry-picked list and gullible reporters will quote them. But a April 1990 decision by the Virginia Industrial Commission doesn't hold much weight with anyone - certainly not with anyone with a brain and some authority.
FedEx Ground and Home Delivery drivers around the country should no longer fear that they don't have the power to stand up to FedEx. The facts and the law are on the side of the drivers. The only plan FedEx seems to have is to try and exhaust the drivers through the appeal process. Stay strong, guys and gals at G/HD, and you'll get the justice you deserve.
-- July 13
Page 1 of 1 pages
