News Updates

Thanks to strong Teamster representation, a UPS part-timer from Local 2785 in San Francisco will receive more than $48,000 in penalty and back pay for supervisors working in violation of the contract.

The union’s grievance on supervisors working was upheld at UPS national grievance panel hearings this week. Supervisors were performing bargaining unit work in violation of the contract, and the company was ordered to pay Elaine Donlin, a 32-year UPS employee, more than $48,000.

“This is really a testament to the importance of documentation in building and winning cases,” said Ken Hall, Package Division Director and International Vice President. “We’re pleased that Elaine got the justice she deserved.”

Donlin returned to work at the UPS San Francisco facility in May last year after being out on injury to find that her job was being performed by multiple supervisors.

“Every day I would document which supervisor was doing my job,” said Donlin, who traveled to Florida to testify in her case. “UPS started giving me little pieces of my job back to satisfy me, but it became a matter of principle. I wanted my job back.”

Donlin has been a model UPS employee with a spotless record. That, combined with her detailed records and documentation, made the difference, said Ed Lynch, Business Agent at Local 2785.

“UPS kept fighting us all the way at every level, trying to lowball and refusing to do the right thing,” Lynch said. “But we stuck with it and we had good documentation. That’s what won the case.”
 

By Steven Greenhouse
Published in the New York Times

Federal and state officials, many facing record budget deficits, are starting to aggressively pursue companies that try to pass off regular employees as independent contractors.

President Obama’s 2010 budget assumes that the federal crackdown will yield at least $7 billion over 10 years. More than two dozen states also have stepped up enforcement, often by enacting stricter penalties for misclassifying workers.

Many workplace experts say a growing number of companies have maneuvered to cut costs by wrongly classifying regular employees as independent contractors, though they often are given desks, phone lines and assignments just like regular employees. Moreover, the experts say, workers have become more reluctant to challenge such practices, given the tough job market.

Companies that pass off employees as independent contractors avoid paying Social Security, Medicare and unemployment insurance taxes for those workers. Companies do not withhold income taxes from contractors’ paychecks, and several studies have indicated that, on average, misclassified independent workers do not report 30 percent of their income.

One federal study concluded that employers illegally passed off 3.4 million regular workers as contractors, while the Labor Department estimates that up to 30 percent of companies misclassify employees. Ohio’s attorney general estimates that his state has 92,500 misclassified workers, which has cost the state up to $35 million a year in unemployment insurance taxes, up to $103 million in workers’ compensation premiums and up to $223 million in income tax revenue.

“It’s a very significant problem,” said the attorney general, Richard Cordray. “Misclassification is bad for business, government and labor. Law-abiding businesses are in many ways the biggest fans of increased enforcement. Misclassifying can mean a 20 or 30 percent cost difference per worker.”

Employers deny misclassifying workers deliberately. The businesses say the lines are unclear between employee and independent contractor.

Workers are generally considered employees when someone else controls how and when they perform their work. In contrast, independent contractors are generally in business for themselves, obtain customers on their own and control how they perform services.

Many businesses are dismayed about the tougher federal and state scrutiny.

“The goal of raising money is not a proper rationale for reclassifying who falls on what side of the line,” said Randel K. Johnson, senior vice president with the United States Chamber of Commerce. “The laws are unclear in this area, and legitimate clarification is one thing. But if it’s just a way to justify enforcing very unclear laws against employers who can have a legitimate disagreement with the Labor Department or I.R.S., then we’re concerned.”

Among the most often misclassified workers are truck drivers, construction workers, home health aides and high-tech engineers.

Portraying regular workers as contractors allows companies to circumvent minimum wage, overtime and antidiscrimination laws. Workers classified as contractors do not receive unemployment insurance if laid off or workers’ compensation if injured, and they rarely receive the health insurance or other fringe benefits regular employees do.

“This denies many workers their basic rights and protections and means less revenues to the Treasury and a competitive advantage for employers who misclassify,” said Jared Bernstein, who as executive director of Vice President Joseph R. Biden Jr.’s Middle Class Task Force has helped orchestrate the administration’s campaign against misclassification. “The last thing you want is to give a competitive advantage to employers who are breaking the rules.”

Organized labor, a strong supporter of Mr. Obama, has long complained about the practice. No administration has undertaken as big a crackdown as Mr. Obama’s, although administration and state officials deny they are doing it as a favor to labor.

California’s attorney general, Jerry Brown, is seeking $4.3 million from a construction firm he accused of misclassifying employees. Last April, he won a $13 million judgment when a court ruled that two companies had misclassified 300 janitors, cheated the state out of payroll taxes and not paid minimum wage and overtime.

Last November, the Illinois Department of Labor imposed $328,500 in penalties on a home improvement company for misclassifying 18 workers, saying it had pressed them to incorporate as separate business entities.

The Obama administration plans to expand investigations by hiring 100 more enforcement personnel. The I.R.S. has begun auditing 6,000 companies to see whether they are in compliance with the law.

The administration also plans to rewrite a three-decade-old I.R.S. rule that lets companies indefinitely classify employees as independent contractors — even when the government knows they are misclassified — so long as the company once had a reasonable belief that the workers were contractors.

One worker who welcomes stricter enforcement is Fritz Elienberg, who spent five years installing cable and Internet service for RCN in Boston.

Mr. Elienberg said he and a dozen other installers reported to an RCN office six mornings a week, shortly after 6:30, where they received their daily assignments and the equipment to do installations. He said he typically worked 10 to 14 hours a day and never received time-and-a-half pay for overtime.

“I didn’t feel like an independent contractor. I didn’t feel like my own boss,” Mr. Elienberg said. “I always believed I was an employee. It’s a win-win situation for them and a lose-lose for us. We didn’t get overtime, sick days, vacations, health insurance or pensions.”

Mr. Elienberg said his foot was seriously injured when a ladder fell on it, but workers’ compensation did not cover his medical bills because he was considered a contractor. He is suing RCN for overtime pay and the value of lost benefits.

Michele Murphy, an RCN spokeswoman, said the company often contracted with outside service providers but did not misclassify workers.

A Harvard study found that 4.5 percent of Massachusetts workers were misclassified, while a Cornell study concluded that 10 percent of New York’s private-sector workers were.

Last October, the attorneys general of New York, New Jersey and Montana threatened to sue FedEx Ground, asserting it had misclassified its drivers. The Teamsters union has long pressed officials to pursue the company. The Teamsters hope to unionize these drivers, but independent contractors, unlike regular employees, cannot form unions.

FedEx argues that these drivers are contractors because they own their trucks and can sell their routes.

One factor in the push for more aggressive enforcement is the Labor Department’s new top law enforcement official, M. Patricia Smith. As New York’s labor commissioner the past three years, she was known for cracking down on misclassification.

Ms. Smith oversaw a task force comprising various state agencies that conducted 2,413 misclassification investigations and 65 joint sweeps in which teams descended on companies’ offices to examine payroll records.

In a Feb. 1 report to New York’s governor, Ms. Smith noted that since late 2007, the task force had identified more than 31,000 instances of misclassification and assessed $11 million in unpaid unemployment taxes and $14.5 million in unpaid wages.

Representatives from UPS and Teamsters Local 2727, which represents approximately 1,200 UPS airline mechanics, met this week in Minneapolis with federal mediators from the National Mediation Board, in an effort to complete the parties’ collective bargaining negotiations.

NMB officials indicated that progress was made in the form of tentative agreements on a number of open issues.

Several matters remain outstanding, however, and the NMB scheduled another week of mediation starting on January 5, 2010. If the parties are unable to reach an agreement that week, the NMB will schedule additional mediation sessions, depending on the parties’ schedules for the 2010 calendar year.

In the meantime, the parties are operating under the terms of their existing collective bargaining agreement and are each prohibited by law from engaging in any economic activities such as strikes, slowdowns and lockouts.

IBT Airline Division Director David Bourne expressed confidence that the parties will be able to complete their contract negotiations through the NMB’s mediation services.

“The parties will be able to work their way through the mediation process and at the end of the day I am sure we will reach a fair, amicable agreement,” Bourne said. “We will make every effort to reach an agreement at the next NMB session in early 2010, and I am hopeful that we will be successful.”

The Teamsters Union was founded in 1903 and represents more than 1.4 million hardworking men and women throughout the United States, Canada and Puerto Rico.

Package delivery rivals FedEx Corp (FDX.N) and United Parcel Service (UPS.N) faced off for the first time over a bill pending in Congress that would change FedEx workers' labor laws, setting out their positions in a debate on Tuesday in Albuquerque, New Mexico.

In question is a reauthorization bill for the Federal Aviation Administration passed in May by the U.S. House of Representatives, under which FedEx employees would be covered by the National Labor Relations Act instead of the Railway Labor Act. The bill is awaiting Senate approval.

"It is legislation written by UPS, for UPS and only benefits UPS," said FedEx spokesman Maury Lane. "Everyone else suffers."

The event, held at the Greater Albuquerque Chamber of Commerce, was the first time representatives from both companies talked face to face about the issue.

FedEx has maintained that as an airline, its staff should continue to be covered by the Railway Labor Act, which governs airlines and railroads. FedEx began as an express delivery airline about 36 years ago, before adding trucks.

FedEx has said switching its governing agency amounts to a bailout for UPS and would strip FedEx of its competitive edge.

FedEx has taken issue with a provision in the bill that would make it easier for its employees to unionize locally instead of having a nationwide vote.

UPS, meanwhile, argues that FedEx employees should be governed by the same law that most of its staff fall under -- the NLRA's -- since FedEx also runs a ground delivery service much like UPS's.

"The fact of the matter is packages are not delivered by airplanes, they are delivered by drivers and vehicles," said UPS spokesman Malcolm Berkeley, after the debate.

"What is it about their express drivers that is so special that they should be under a different law than every other driver in the country?"

While UPS drivers are represented by the Teamsters, FedEx drivers do not have union representation.

"It's time to level the playing field in the package delivery industry," Ken Hall, the Teamsters' vice president and Package Division director, said in an emailed statement.

"No one company should get a special deal at the expense of U.S. taxpayers," Hall said.

FedEx launched an Internet campaign at www.brownbailout.com in June tied to the bill.