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News | Sep 14, 2012

FEDERAL COURTS ARE STARTING TO CATCH-ON TO THE “INDEPENDENT CONTRACTOR” SCAM

Our law firm continues to file federal court lawsuits challenging the corporate scam of misclassifying workers as “independent contractors” rather than “employees.”  This practice enables corporations to: (i) cheat workers out of basic benefits (such as, for example, overtime pay, worker’s compensation insurance, and unemployment insurance), (ii) cheat the government out of tax dollars, and (iii) gain an unfair advantage over competitors who comply with the law.

Make no mistake about it: the practice of misclassifying employees as “independent contractors” is a disaster for American workers and their families.  Congress’ failure to effectively crack down on this practice is a national embarrassment.

Since our politicians are incapable of protecting working families against the independent contractor scam, it’s up to Trial Lawyers and the hard-working (but under-resourced) Department of Labor to protect working families.

Based on our review of the recent caselaw, Federal Court decisions appear to be trending in favor of workers in lawsuits alleging independent contractor misclassification.  It seems that Federal Judges are becoming more skeptical of the independent contractor business model.

We see hints of the growing judicial skepticism in a Seventh Circuit Court of Appeals opinion issued in the massive, multi-district litigation involving thousands of FedEx package delivery drivers allegedly misclassified as independent contractors.  (Our firm has the privilege of working on the FedEx litigation alongside many excellent law firms throughout the United States.)

The Seventh Circuit opinion, issued on July 12, 2012, made some very cogent observations about the importance of the independent contractor misclassification issue:

The question [of whether the drivers were properly classified as independent contractors] appears to be a close one.  And the issue is of great importance not just to this case but to the structure of the American workplace.  The number of independent contractors in this country is growing.  There are several economic incentives for employers to use independent contractors and there is a potential for abuse in misclassifying employees as independent contractors.  Employees misclassified as independent contractors are denied access to certain benefits and protections.  Misclassification results in significant costs to government: “[B]etween 1996 and 2004, $34.7 billion of Federal tax revenues went uncollected due to the misclassification of workers and the tax loopholes that allow it.”  And misclassification “puts employers who properly classify their workers at a disadvantage in the marketplace[.]”  FedEx has approximately 15,000 delivery drivers in the U.S.  This case will have far-reaching effects on how FedEx runs its business . . . throughout the United States.  And it seems likely that employers in other industries may have similar arrangements with workers, whether delivery drivers or other types of workers.  Thus, the decision in this case will have ramifications beyond this particular case and FedEx’s business practices, affecting FedEx’s competitors and employers in other industries as well.

Craig v. FedEx Ground Package System, Inc., 686 F.3d 423 (7th Cir. 2012).

The Seventh Circuit hit the nail on the head.  In these tough economic times, the fight against independent contractor abuse is more important than ever.

If your firm represents current or former independent contractors in workers compensation lawsuits or other types of litigation, we would be delighted to speak with your clients about whether, due to a misclassification, they might be able to recover overtime wages and other valuable benefits.  As you know, we always pay a fair referral fee.

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