FedEx Wins One in CT

February 26th, 2007 by

With 15,000 “independent contractor” drivers across America, FedEx is in the midst of a huge experiment in human resources. The fundamental question, of course, is whether their decision to contract out a significant portion of their basic operations is legal. A number of states (Including California, New Jersey, Montana and Massachusetts) have ruled that the drivers are actually employees, entitled to all the benefits of employment, including workers comp. We have blogged the issue a number of times, and will continue to do so.
The adverse findings have not slowed down the ubiquitous delivery company. They are appealing all the losses and are confident that their strategy is both legal and appropriate. It’s certainly no secret. They stipulate the nature of the relationship with drivers up front and in writing. Only time will tell if they will prevail. Despite their chain of losses in a number of state courts, it appears that they can operate comfortably in at least one jurisdiction.
In April 2002 Edward Maskowsky began operating a FedEx pick up and delivery service in Connecticut. In an hour-long orientation meeting, the company made it very clear that he was to function as an “independent contractor.” To set up the business, he purchased a truck, insurance, uniforms and his own disability policy. He filed taxes as a sole proprietor in 2002 through 2004.
Maskowsky suffered a lumbar spine injury in April 2005. He collected weekly indemnity benefits from his disability carrier, which also paid some of his medical expenses. We can safely assume that the benefits under the disability policy were substantially less than those under workers comp. No disability insurance can match the zero co-pays and zero deductibles of workers comp.
Seeking better benefits, Maskowsky filed a workers comp claim, alleging he was an employee of FedEx. In his claim, he stated that FedEx controlled the means and methods of how he conducted his delivery service within the specified route. Maskowsky’s attorney did not have to dig deep to find a rationale for the claim. There are entire websites devoted to proving that FedEx drivers are really employees of the company.
FedEx countered with documentation that Maskowsky, from day one, knew that he was an “independent contractor.”
Workers Comp Fraud
George Waldron, a Commissioner in Connnecticut’s workers comp bureau, found in favor of FedEx. You can find his terse ruling here. We might be tempted to conclude that the commissioner buys the FedEx theory of employment, hook, line and sinker. I’m not so sure. Maskowsky’s claim was undermined by a rather startling fact: during the period he worked for FedEx, he engaged in workers comp fraud.
As an “independent contractor” for FedEx, Maskowsky was free to hire others to perform the work (provided, of course, that they followed the strict FedEx rules and wore the FedEx uniform). He apparently hired at least one person to carry out some of the work. Thus Maskowsky himself became an employer. (In doing so, he inadvertantly strengthened FedEx’s argument that he is an independent contractor – employees cannot contract out their responsibilities). However, he chose to pay his employee in cash. He did not provide any benefits. You can almost sense the rage as Commissioner Waldron typed (or dictated) these words: “The claimant did not provide workers’ compensation insurance for his employee.”
It is a very, very bad idea to seek coverage under the comp umbrella, while declining to provide this same coverage for your own employee! Waldron hoists Maskowsky on his own petard. As for other FedEx drivers in Connecticut, they should assume for the moment that they are indeed independent contractors. And they better make sure that they secure coverage for any and all employees, lest they end up like Maskowsky, at risk for being charged with workers comp fraud.