The courts continue to deal with ongoing contract labour disputes due to lack of due diligence in consistently classifying workers and ensuring that contractual agreements are legal and fair. The following FedEx lawsuit from Helena, Montana exemplifies many of the complex legal issues that can arise when organizations have not properly protected themselves.
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Federal court judge Charles Lovell in Helena has said that the arbitration clauses in FedEx contracts with its drivers are so one sided that they are “Unenforceable”, and has ruled that the lawsuit move forward without arbitration. Lovell also ruled to dismiss four of the eight complaints made by Tracy LaSalle in his wrongful discharge lawsuit filed against FedEx Ground Package System. The dismissed complaints include malice, violation of Montana’s independent contractor law by misclassifying him as an independent contractor instead of an employee, unjust enrichment, and not paying him for overtime.
Lovell wrote that, under the law, an arbitration provision is unenforceable when it is both “procedurally and substantively unconscionable”, and this case falls into that area. Lovell ruled to wave the arbitration primarily because it unfairly requires “binding arbitration of the weaker bargaining party’s claims, but allows the stronger bargaining party the opportunity to see judicial remedies to enforce contractual obligations”. Lovell stated that “This type of disparity can become so one-sided and unreasonable that the agreement becomes unconscionable and oppressive.”
LaSalles’s lawsuit is part of a larger issue in which FedEx drivers argued that they were employees rather than independent contractors, and as such should be awarded overtime and holiday pay, and not be required to pay operating expenses for delivery vehicles, renting uniforms, and fuel.
In October 2010 a settlement was reached with FedEx that said the delivery drivers were, in fact, employees, but it also outlined a business model in which they could still be private contractors if they handled numerous routes instead of just one. Initially the required number was three, and LaSalle tried to sell his route. However, FedEx then changed the number of routes to two, and LaSalle’s sale fell through and he claims to have lost $175,000.
The October 2010 precedent setting settlement has had a large impact on LaSalle’s case and other subsequent trials. This case indicates that it is increasingly important for companies to perform the necessary steps in order to ensure compliance with contract labour law and tax regulations.
For more information about how your organization can mitigate contract labour risk, contact Contingent Workforce Solutions at:Christina Fabugais
Contingent Workforce Solutions Inc.
Direct Phone: 416-642-9077
Toll Free: 1-866-837-8630 x9077