Another FedEx Contractor Ruling: What SMBs Need to Know

Yet another court has ruled on FedEx's ongoing legal dispute regarding the employee status of its drivers. Small and medium-sized business owners should once again be paying close attention.

The latest ruling comes from the Kansas Supreme Court. Similar to the ruling by a federal appeals court earlier this year, the Kansas Supreme Court held that hundreds of FedEx drivers who the company had claimed were independent contractors were actually employees under Kansas law.

What should business owners take away from this ruling? Here are three points to remember:

• A written agreement that calls workers "contractors" may not be decisive. If your business makes use of contract labor, then you likely have a contractor agreement in which the worker agrees that he will be a contractor, as FedEx did with its drivers. However, this written agreement is not conclusive proof that a worker is a contractor rather than an employee. Even when a worker has signed an agreement stating he is a "contractor," if he can show he was treated as an employee, he will likely be considered an employee regardless of the wording of the agreement.
• Your "control" over the worker may determine the worker's status. The amount and type of control exercised over a contractor may be a determinative factor in proving whether the worker is an employee or an independent contractor. In its ruling, the Kansas Supreme Court held that "Even where the factors should point us toward finding that the drivers are independent businesspersons, FedEx's control and micromanaging undermine the benefit that a driver should be able to reap from that arrangement." In FedEx's case, the court found that FedEx controlled most of the driver's actions, including everything from delivery methods to the drivers' appearance.
• Courts will use a balancing test. In determining whether a worker is an employee or a contractor, a court will often use a balancing test, weighing multiple factors. In this case, the Kansas Supreme Court adopted a 20-factor test, weighing such issues as: training provided by the employee, the degree to which work is performed on the employer's premises, whether the worker can work for more than one firm at a time, and whether the employer has a right to terminate the worker. Making sure that, on balance, the majority of factors such as these show a worker is a contractor as opposed to an employee is the only surefire way to be sure your classifications will stand up in court.

To learn more about the rules regarding contractors, check out FindLaw's Learn About the Law section on Hiring Independent Contractors.

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Related Resources:

• Browse Employment Law -- Employer Lawyers by Location (FindLaw)
• Kansas Supreme Court: FedEx Ground Drivers Not Contractors (Forbes)
• IRS Cracking Down on 'Independent Contractors' (FindLaw's Free Enterprise)
• 3 Tips for Hiring Independent Contractors (FindLaw's Free Enterprise)