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September 9, 2014

Employee Classification: Make it Proper and Make it Accurate (article)

The U. S. Court of Appeals for the 9th Circuit recently rendered two opinions relating to an employer’s misclassification of common law employee vs. independent contractor (Edward Slayman, et al. v. FedEx Ground Package System, Inc., DBA FedEx Home Delivery, Inc., Nos. 12-35525 and 12-35559; Dean Alexander, et al. v. FedEx Ground Package System, Inc., DBA FedEx Home Delivery, Nos. 12-17458 and 12-17509, 9th Cir.; 2014 U.S. App. LEXIS 16585).

 

Both cases center around FedEx classifying certain drivers as independent contractors rather than employees; and thus, “forcing them to incur business expenses and depriving them of benefits otherwise owed to employees” under both California and Oregon laws.  In both cases, the FedEx drivers were required to drive FedEx approved vehicles, wear FedEx uniforms and adhere to FedEx grooming standards, as well as follow other FedEx policies and procedures.  FedEx advised the drivers on which packages were to be delivered by date and time, and only on FedEx approved routes.

 

In its findings, the Ninth Circuit panel determined that the “right to control” is the primary test for determining employee vs. independent contractor.  For many reasons, not the least of which are compliance with various federal and state employment tax laws, it very important to properly classify individuals as employees or independent contractors.   An employer cannot simply classify an individual as an employee or independent contractor randomly.  Rather, according to the 9th Circuit, the right to control the activities of the individual is the primary test to determine status. 

 

Watch for our upcoming 4th installment in our CBIZ blog series on audits that will focus on workforce audits to ensure proper classification of employees and independent contractors.

 

The information contained in this article is provided as general guidance and may be affected by changes in law or regulation. This article is not intended to replace or substitute for accounting or other professional advice. Please consult a CBIZ professional. This information is provided as-is with no warranties of any kind. CBIZ shall not be liable for any damages whatsoever in connection with its use and assumes no obligation to inform the reader of any changes in laws or other factors that could affect the information contained herein.

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