Locked Out of the Dream

| April 28, 2009

For many years, the Teamsters have targeted the local delivery/courier segment in their organizing efforts. In some cases where a driver’s status as an independent contractor has been a barrier to organizing, misclassification allegations have arisen and been taken to court. Suits against FedEx Ground operations in an estimated 20 states allege that the local drivers don’t pass the 20-point control test to determine whether contractors are independent and not employees entitled to benefits and the choice of a union contract, a charge the company denies.

Other unions have taken on courier businesses that also call their delivery people independent contractors, and Teamster organizing efforts have seen some success among local intermodal drivers in Miami, Los Angeles and ports in the northeast.
Late last year, California plaintiffs in one FedEx case won a $27 million judgment, and other suits continue. James C. Sullivan, a lawyer with Shughart Thomson & Kilroy, estimates a class-action suit on the national level could end up costing FedEx $1 billion or more.

Toward a ‘more perfect union’
President Obama has made no secret of his affinity for organized labor. Last year, he was a co-sponsor of the Employee Free Choice Act (or “Card Check”), reintroduced in the House and Senate March 10, which would make it easier for employees to obtain union representation by eliminating the secret ballot requirement for union recognition.

In 2007, Obama sponsored the Independent Contractor Proper Classification Act, which died in the Senate. Last year, a similar bill called the Taxpayer Responsibility, Accountability and Consistency Act was put forward in the House by Rep. Jim McDermott (D-Wash.). Both bills would have been a boon to union organizing efforts, as they would have instructed the U.S. Treasury Department to set new federal standards for classifying independent contractors: protecting whistleblowers who challenge their IC classification (opening up clear complainant avenues to reclassification as an employee); levying penalties for misclassification beyond current levels; and designating the IRS to referee disputes. In the 2007 bill, the long-standing “safe harbor” provision that permits carriers to defend their position by saying, “That’s the way everyone else does it,” would be repealed.

If, says Botta, a company’s ICs have been treated as employees in the past – as is the case in some trucking companies that have transitioned to a partial owner-operator model by encouraging company drivers to make the jump via lease-purchase programs or other related truck-financing options – under the terms of the 2007 bill, the IRS would have a strong mandate to investigate.

Though these congressional inquiries routinely came propped with effusive recognitions of the difference between mistaken misclassification and deliberate misclassification (the latter being the ultimate target), transportation attorneys and others see all of this as the prelude to a potential storm of investigation and litigation that could well cause carriers of all shapes and sizes to restructure their business models to guard against the risk of misclassification penalties.

The IC issue “would require every motor carrier out there to take a look at the risk of it,” says Doug Grawe, in-house counsel for heavily owner-operator carrier Dart Transit. While Grawe says he’s no doomsayer, he does see the 2007 bill as particularly stringent on employers who misclassify. “The penalties in this are quite severe,” he says. “For example, right now

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