Independent contractors present many legal obstacles for companies

In an effort to simplify and streamline their businesses, many companies choose to hire independent contractors to perform certain duties. When compared to regular employees, independent contractors offer companies many benefits, including lower labor costs, reduced legal liability and greater flexibility in hiring and firing.

However, companies must be careful in how they hire and manage their independent contractors. For instance, if a court determines a company misclassifies a worker as an independent contractor when he or she is actually a regular employee, the employer may face several penalties, including having to reimburse the worker for unpaid wages and overtime.

The impact of Slayman v. FedEx

Distinguishing between an independent contractor and a regular employee, however, is not as easy as it sounds. Even if an independent contractor agreement exists, a court may nevertheless determine an individual is an employee for legal purposes. Indeed, this is exactly what happened in the Ninth Circuit Court of Appeals case titled Slayman v. FedEx Ground Package System.

In Slayman v. FedEx, the court was charged with the task of examining whether, under Oregon law, 363 full-time delivery drivers who worked for FedEx from 1999 through 2009 were independent contractors or not. Specifically, the drivers in this case claimed that FedEx incorrectly classified them as independent contractors under the company's Operating Agreement, and as a result, the drivers not only had illegal deductions taken out of their paychecks but were also wrongfully deprived of overtime pay.

The court ultimately determined that these drivers were not independent contractors based on Oregon's "right-to-control" test. The court focused its analysis on the fact that FedEx's Operating Agreement allowed the company to control:

  • The appearance of it drivers, including their clothing, hats, shoes, socks, hair and hygiene
  • The appearance and condition of the drivers' delivery vehicles, including color, cleanliness, logo and shelving dimensions
  • The times the drivers could work, which was done by structuring drivers' workloads so that they had to work 9.5 to 11 hours every workday
  • The aspects of how and when the drivers could deliver their packages, including delivery time windows for certain customers and the assignment of specific delivery areas to particular drivers

While the court noted that some evidence existed favoring FedEx's viewpoint that its drivers were independent contractors, the court determined it was not sufficient to overcome the evidence listed above.

Legal guidance is available

If anything, this opinion illustrates that companies should be properly prepared for legal challenges when they classify their workers as independent contractors. While this may prove difficult, it is not impossible, especially if they execute well-drafted independent contractor agreements from the start. As FedEx discovered, having an agreement in place is simply not enough - it must be sufficient to withstand legal scrutiny.

Regardless of whether you are already involved in an employment dispute or need help drafting an independent contractor agreement, it is crucial to consult with an experienced attorney. A lawyer can help explain your rights and guide you through your various legal options. The failure to adequately address these issues as soon as possible can lead to drawn-out court battles.