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Contractors ask federal judges to consider them as full-time employees for '02 tax filing purposes
By Laurence Viele Davidson
Bloomberg News
Published on Friday, Jan 04, 2008
FedEx Corp. contract drivers suing the company for pay and benefits asked federal judges to consider an Internal Revenue Service preliminary decision that they may be regarded as full-time employees for 2002 tax purposes.
FedEx, the second-largest U.S. package delivery service, said in a regulatory filing last month it might have to pay $319 million in taxes and penalties plus interest for 2002 for misclassifying the contractors.
The IRS is reviewing calendar years 2004 through 2006 for similar issues, FedEx said.
The drivers want to use the IRS decision as leverage in dozens of lawsuits seeking hundreds of millions of dollars, claiming the company exerts control over them as if they were full-time workers without paying full-time benefits.
The cases are consolidated in federal court in South Bend, Ind.
''The IRS determination demonstrates that on the merits, plaintiffs can offer and prove by common evidence that the drivers are legally employees, not independent contractors,'' the plaintiffs said in a request for ''judicial notice,'' filed Wednesday to U.S. District Judge Robert Miller.
FedEx said there were ''mischaracterizations'' in the plaintiffs' filing.
One case is certified as a nationwide class action and dozens of others are before Miller for similar consideration.
Memphis, Tenn.-based FedEx is appealing the certification of one case to the 7th U.S. Circuit Court of Appeals, which also has the plaintiff's request to note the IRS finding.
FedEx told the appeals court in a letter the IRS finding is preliminary, not binding, and reverses a 1994 decision validating its contractor policy.
FedEx said in a statement Thursday that the company has ''strong defenses to the IRS's tentative assessment and will vigorously defend our position, as we continue to believe that FedEx Ground's owner-operators are independent contractors and that no loss is probable.''
FedEx had legal setbacks related to its ground-delivery contractor policy in 2007.
In December, Massachusetts Attorney General Martha Coakley fined FedEx $190,000 for what she called intentionally misclassifying 13 drivers as contractors.
The California Supreme Court in November upheld a trial court decision that single-route contractors in that state were full-time workers.
FedEx defends its contractor system as an opportunity for drivers to be entrepreneurs. Multi-route contractors can hire their own workers.
The company discontinued single-route contract drivers in California after the courts sided with the drivers.
FedEx Corp. contract drivers suing the company for pay and benefits asked federal judges to consider an Internal Revenue Service preliminary decision that they may be regarded as full-time employees for 2002 tax purposes.
Get the full article here.
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