Posted by & filed under Accounting Information Systems, Accounting Principles, Auditing, Cost Accounting, Financial Accounting, Financial Reporting and Analysis, Financial Statement Analysis, Intermediate Accounting, Managerial Accounting.

The Kansas Supreme Court found that FedEx drivers were illegally misclassified as independent contractors from the late 1990s through 2011, despite being treated as employees. According to Alan Pyke, FedEx set contract agreements with delivery and pickup drivers in order to avoid the higher costs associated with making the drivers full employees.

1. What is the amount per worker that the Treasury Department estimates that FEDEX saved annually from this misclassification?
2. Based on this, what types of payroll-related expense accounts would have seen savings?
3. The Kansas case is but one of several FedEx suits filed last decade. What is the estimate of penalty that FEDEX will face for back pay to California drivers alone?
4. As an auditor, what type of evidence would you ask to review in order to determine whether employees were misclassified as independent contractors?


Pyke, A. (2014). FedEx Illegally Labeled Employees As Independent Contractors To Cut Costs, Kansas Court Finds. Think Progress, Oct. 7 (Retrievable online at