In a recent decision by the Supreme Court of Kansas, the court provided practical guidance for employers as they contemplate hiring independent contractors. Craig v. FedEx Ground Package System Corp. (Kansas 2014). This case began as numerous class actions filed throughout the country by drivers who drove FedEx vehicles between 1998 and 2007. The drivers allege they were employees, rather than independent contractors, and sought repayment of all costs and expenses they expended on behalf of FedEx, and sought unpaid overtime wages. On appeal, the Seventh Circuit Court of Appeals certified two questions to be answered by the Supreme Court of Kansas. The essential question was this: are FedEx’s delivery drivers employees under Kansas law?
In answering yes, the court stated, “Notwithstanding the form or labels utilized, we must determine whether the substance of the relationship … renders the drivers employees within the meaning of the [law]. Ultimately … form does not trump the substantive indicia of an employer/employee relationship.”
This point is crucial for employers to understand. Since employers have the responsibility to demonstrate the existence of an independent contractor relationship, employers should first thoroughly evaluate the substance of the proposed relationship. If the substance supports an independent contractor designation, then the employer can attach the independent contractor label. Employers cannot “label” first and relax contently that this assertion is correct and defensible.
To emphasize this point, the court reminded employers, “if a worker is hired like an employee, dressed like an employee, supervised like an employee, compensated like an employee, and terminated like an employee, words … cannot transform that worker’s status into that of an independent contractor.”
Employers should take to heart the court’s concluding statement, “Viewing the factors as a whole … FedEx has established an employment relationship … but dressed that relationship in independent contractor clothing.” If you need assistance in evaluating an independent contractor relationship, please contact one of MSEC’s attorneys.