Outten & Golden: Empowering Employees in the Workplace

Posts Tagged ‘court decisions’

Justice Gets Delivered To FedEx Workers

Thursday, June 18th, 2015

Emily-Foster_avatarFedEx says it “lives to deliver.” Last Friday, more than 2,000 of its workers finally received a delivery of justice from a federal judge.

A settlement in the case filed in U.S. District Court on behalf of the workers, Alexander v. FedEx Ground, means the company will pay $277 million to resolve the claims of FedEx Ground and FedEx Home Delivery workers who were victims of worker misclassification since the year 2000. These are workers FedEx classified as “independent contractors” but treated largely as if they were on the company payroll.

We first wrote about this last August, when the 9th U.S. Circuit Court of Appeals ruled that FedEx’s employees (in California and Oregon, and likely many states with similar employee-protection laws) are, in fact, “employees as a matter of law” – not independent businesspeople who had the level of control over their jobs that a self-employed person would expect to have.

“The drivers must wear FedEx uniforms, drive FedEx-approved vehicles, and groom themselves according to FedEx’s appearance standards,” the ruling said. “FedEx tells its drivers what packages to deliver, on what days, and at what times. Although drivers may operate multiple delivery routes and hire third parties to help perform their work, they may do so only with FedEx’s consent.”

According to the Economic Policy Institute, worker misclassification is an increasingly common problem, “a business model for unscrupulous employers who use it to avoid employment-related obligations and save on labor and administrative costs.”

EPI says independent contractor misclassification occurs “when a worker who should be considered a direct employee of a business is treated as a self-employed contractor.” Françoise Carré, in his June 8, 2015 report for EPI titled “(In)dependent Contractor Misclassification,” workers who are misclassified are “ineligible for unemployment insurance, workers’ compensation, minimum wage, and overtime, and are forced to pay the full FICA tax and purchase their own health insurance.” Misclassification also “undermines their bargaining power and leaves workers more vulnerable to wage theft.”

Carré also wrote that misclassification leads to the federal and state governments losing revenue from necessary income taxes, while unemployment insurance, workers compensation and disability insurance systems are “adversely affected.”

It also makes it easy for companies to bypass requirements of the Fair Labor Standards Act and the 1986 Immigration Reform and Control Act.

The report points out that worker misclassification is most common in professions where “work is performed in isolation,” which FedEx drivers exemplify.

The ruling found that the company owes its drivers “for illegally shifting to them the costs of such things as the FedEx branded trucks, FedEx branded uniforms, and FedEx scanners, as well as missed meal and rest period pay, overtime compensation, and penalties.” Drivers were required to pay out of pocket for the trucks, uniforms, and scanners, and even the wages of other employees the company asked the drivers to hire.

After the settlement, the 2,000 workers were granted the rights and benefits entitled to employees under California’s laws. FedEx Ground’s independent contractor model was deemed unlawful, and the settlement is considered as one of the largest in recent history – showing that mislabeling workers can be economically catastrophic to a business.

That doesn’t mean that FedEx isn’t still trying to game the system so it doesn’t have to treat its workers as workers. The company has since 2011 implemented a new system in which delivery drivers are employees of a subcontractor to FedEx, and the trade publication Transport Topics quoted a FedEx spokesperson as saying that the company would “complete the transition to a new independent service provider agreement later this year.”

After Friday’s settlement, FedEx did tweet that new job openings were available. We’ll see if FedEx has learned its lesson about worker misclassification – or if the company is absolutely, positively delivering new ways to scam its workers.

This blog was originally posted on Our Future on June 16, 2015. Reprinted with permission.

About the Author: The author’s name is Emily Foster. Emily Foster is a regular contributor to Our Future.

How Does the Fall of DOMA Impact the FMLA and Other Employee Benefits?

Friday, June 28th, 2013

Jeff NowakUnless you’ve been securely wedged under a rock over the past 24 hours, you know that the U.S. Supreme Court has declared unconstitutional the Defense of Marriage Act (DOMA), which had established a federal definition of marriage as a legal union only between one man and one woman.

Yesterday, as Justice Anthony Kennedy read the opinion of the Court in U.S. v. Windsor, I can only imagine that his thoughts were consumed completely by the manner in which the extinction of DOMA would impact the future of the Family and Medical Leave Act. Right?

But let’s not leave this to chance.  In the unlikely event that Justice Kennedy (and the rest of the Court’s majority) didn’t fully appreciate how the FMLA might be impacted, we’ve got the Court’s back, as we discuss the issue more fully below:

How FMLA is Impacted after the Fall of DOMA

As we know, the FMLA allows otherwise eligible employees to take leave to care for a family member with a serious health condition.  “Family member” includes the employee’s spouse which, under the FMLA regulations, is defined as:

a husband or wife as defined or recognized under State law for purposes of marriage in the State where the employee resides, including common law marriage in States where it is recognized.  29 C.F.R. 825.102

Initially, this seems to suggest that the DOL would look to state law to define “spouse.”  Not so fast. According to a 1998 Department of Labor opinion letter, the DOL acknowledged that the FMLA was bound by DOMA’s definition that “spouse” could only be a person of the opposite sex who is a husband or wife.  Thus, the DOL has taken the position that only DOMA’s definitions could be recognized for FMLA leave purposes.  As result, FMLA leave has not been made available to same-sex spouses.

That changed yesterday, at least in part.

What’s Clear about FMLA After the Court’s Ruling

In striking down a significant part of DOMA, the Supreme Court cleared the way for each state to decide its own definition of “spouse.”  Thus, if an employee is married to a same-sex partner and also lives in a state that recognizes same-sex marriage, the employee will be entitled to take FMLA leave to care for his/her spouse who is suffering from a serious health condition, for military caregiver leave, or to take leave for a qualifying exigency when a same-sex spouse called to active duty in a foreign country in the military.

What’s Unclear about FMLA After the Court’s Ruling

But what about employees who live in a state that does not recognize same-sex marriage?  Are they entitled to FMLA leave to care for their spouse?

As an initial matter, the regulations look to the employee’s “place of domicile” (state of primary residence) to determine whether a person is a spouse for purposes of FMLA.  Therefore, even if the employee formerly lived or was married in a state that recognized the same-sex marriage, he/she is unlikely to be considered a spouse in the “new” state for purposes of FMLA if the state does not recognize the marriage.  This is no small issue, since 30+ states currently do not recognize same-sex marriage and some don’t go all the way (e.g., Illinois, which recognizes same-sex unions, not marriages).

Surely, some might argue that the United States Constitution requires other states to recognize the marriage; however, this issue is far from settled.  My friend and Indiana University Maurer School of Law professor Steve Sanders writes a compelling article for SCOTUSblog contending that an individual married in one state maintains a “significant liberty interest” under the 14th Amendment’s Due Process Clause as to the ongoing existence of the marriage.

Here, employers clearly need some help from the DOL.  Might the DOL draft regulations on how employers administer the FMLA in situations where the employee’s spouse is not recognized under state law?  If so, we could see the DOL give life to concepts such as a “State of Celebration” rule, in which a spousal status is determined based on the law of the State where the employee got married.

Without more guidance, it still is too early to tell where this question is heading.  Nevertheless, the employer community looks forward to helping shape these rules.

Other Key Benefits Affected by the DOMA Decision

FMLA is not the only federal law impacted by the fall of DOMA.  If federal regulations follow through, some of the notable federal laws and benefits impacted may include:

  • Taxes: Same-sex spouses likely will share many federal benefits and be able to manage tax liability in a way that opposite sex spouses typically do.  For instance, an inheritance, which was taxed under DOMA, will no longer be taxed for a same sex spouse (this was the factual scenario at issue in the decision). Income taxes, payroll taxes, health insurance benefits, and tax reporting may also be impacted.
  • Affordable Care Act and COBRANPR reports that the Court’s decision will impact how the Affordable Care Act (affectionately referred to as Obamacare) is carried out, though many details remain unclear. Moreover, same-sex spouses may be eligible for continuation of health insurance benefits (COBRA) even though the spouse may lose his/her job.
  • Employee benefits: Same-sex spouses likely will be treated equally when it comes to employee benefits, including a 401(k) plan.
  • Social security benefits: The Court’s decision also paves the way for social security survivor benefits to continue onto a legally married same-sex partner.
  • Citizenship:  According to NBC News, some 28,000 same-sex spouses who are American citizens will now be able to sponsor their non-citizen spouses for U.S. visas and can qualify for immigration measures toward citizenship.

For future updates on the impact of DOMA on FMLA and employee benefits generally, feel free to follow me on Twitter or Linkedin.  I’ll be posting more there.  You also can subscribe to this FMLA Insights blog on the right hand side of this page.  Just enter your address and I’ll email you my updates directly.

This article was originally printed on FMLA Insights on June 27, 2013.  Reprinted with permission.

About the Author:  Jeff Nowak is a management side attorney at Franczek Radelet P.C. and author of the FMLA Insights blog.

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