Beware! The Little Things Will Make A Big Difference In Court's Assessment Of Whether Individuals Are Independent Contractors

Laner Muchin, Ltd.
Contact

The United States Court of Appeals for the Seventh Circuit currently has a series of appeals pending before it relating to Fed Ex's alleged misclassification of its drivers, including drivers in Kansas, as independent contractors.  In one of these cases, the Seventh Circuit certified the question of whether the drivers were "employees" or "independent contractors" under Kansas state law to the Kansas Supreme Court.  Dealing another blow to employers on the independent contractor front, the Kansas Supreme Court answered the certified question by holding that the drivers are employees, not independent contractors, under Kansas wage-hour law.  The Court applied a 20-factor test (which is applied in other jurisdictions, as well), but essentially held that, despite the existence of fairly sophisticated independent contractor agreements and some evidence that the drivers could control and change their profits and losses, Fed Ex "micromanaged" the drivers to the point of making them employees.  In particular, the Court noted that Fed Ex maintained significant and detailed control over driver clothing, vehicles, and other items that made it difficult for the drivers to change their profits and losses without Fed Ex making more packages available for delivery.  While not necessarily a surprise given the recent multi-agency crackdown on independent contractor (mis)classifications, and while issued as an opinion interpreting Kansas state law, this ruling highlights the importance of not only crafting well-drafted independent contractor agreements in the first place, but making sure the contracts are executed in a manner consistent with a true independent contractor relationship.  When making these big, costly decisions for employers, courts in all jurisdictions (as well as the IRS and DOL) are looking at the little things: whether the employer has control of uniforms, whether the employer has detailed procedure manuals relating to the actions of the alleged independent contractors, etc.  Micromanagement has and will continue to be held against companies in courts' and agencies' assessments of independent contractor relationships so employers must carefully assess all aspects of their relationships with those whom they treat as independent contractors.

Written by:

Laner Muchin, Ltd.
Contact
more
less

PUBLISH YOUR CONTENT ON JD SUPRA NOW

  • Increased visibility
  • Actionable analytics
  • Ongoing guidance

Laner Muchin, Ltd. on:

Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
- hide
- hide