It’s an often over-looked area of compliance, but misclassified employees can cost your company big time.

FedEx is learning an expensive lesson. Several years ago, the company misclassified its drivers as independent contractors (ICs) instead of employees. The feds discovered the error — and the company’s been paying for it ever since.

In 2002, FedEx was ordered to pay the drivers (current and former) $5 million in business expenses. And in 2007, the federal government found the company owed $319 million in back employment taxes and penalties related to the error.

And it’s still not over: The California Superior Court has just ordered the company to pay another $9.1 million to the drivers for job-related expenses. Similar cases are being heard in 40 other states.

Something to think about next time a hiring manager asks if its that big of a deal to just call someone an IC for convenience’s sake.

Tags: A/P, Communication, Court rulings, Independent contractors, Payroll, Penalties, Tax compliance