FedEx Settles California Suit Reversing Claim that Drivers are Independent Contractors

FedEx has filed paperwork with the SEC confirming that it has settled a long-running dispute with over 2,000 of its Fedex Ground California drivers.

The Class settlement, once approved by the court, will create a $227 million fund to resolve claims of approximately 2,000 FedEx Ground and FedEx Home Delivery pickup and delivery drivers dating back to the year 2000.

As a result, FedEx may owe its workforce of drivers hundreds of millions of dollars for illegally shifting to them the costs of such things as the FedEx branded trucks, FedEx branded uniforms, and FedEx scanners, as well as missed meal and rest period pay, overtime compensation, and penalties.

The Ninth Circuit Court of Appeal concluded – in a strongly worded opinion – that the Plaintiff drivers were employees who were misclassified by FedEx as independent contractors, leaving only the question of “how much” to be decided by the trial court.

The hotly contested suit consumed more than a decade of litigation. Attorney Beth Ross of the Leonard Carder firm said, “The $227 million settlement, one of the largest employment law settlements in recent memory, sends a powerful message to employers in California and elsewhere that the cost of Independent Contractor misclassification can be financially punishing, if not catastrophic, to a business.”

Judge Fletcher’s majority opinion was very clear on the question of whether these workers are employees or independent contractors, statingL “We hold that plaintiffs are employees as a matter of law under California’s right-to-control test.” The court’s decision is the most recent in a series of cases that have methodically proven that FedEx Ground’s independent contractor model is built on the legal fiction that its drivers are in business for themselves.

The Ninth Circuit decisively rejected that claim.

The court’s finding in Alexander that drivers in California are covered by California’s workplace protection statutes not only impacts one of FedEx Ground’s largest workforces but could influence the outcome in over two dozen cases nationwide in which FedEx Ground drivers are challenging the legality of their independent contractor classification.

Millions of packages are delivered every day across the state under the control, direction, and supervision of FedEx Ground. In addition, many trucking companies have been operating under a similar model in which they classify their drivers as independent contractors.

“FedEx Ground built its business on the backs of individuals it labeled as independent contractors, promising them the entrepreneurial American Dream,” said Leonard Carder Attorney Beth A. Ross who is a national leader on cases covering the exploitation of workers by mischaracterizing them as independent contractors.

“However, as Judge Trott said in his concurring opinion, not all that glitters is gold.” FedEx now requires its so-called contractors in California to hire a secondary workforce of FedEx drivers, who do the same work as the plaintiffs under the same contract. The Alexander decision calls into question FedEx’s strategy of making plaintiffs the middle men between the secondary workforce of drivers and FedEx.

“We have heard of many instances where the secondary drivers are earning such low wages that they have to rely on public assistance to make ends meet,” said Ross. Background on the everyday experience for FedEx Ground drivers includes: FedEx Ground drivers were required to pay out of out of pocket for everything from the FedEx Ground branded trucks they drove (painted with the FedEx Ground logo) to fuel, various forms of insurance, tires, oil changes, maintenance, etc. as well as their uniforms, scanners and even workers compensation coverage.

In some cases workers were required to pay the wages of employees who FedEx Ground required them to hire to cover for them if they were sick or needed a vacation, to help out during the Christmas rush, and in some cases to drive other FedEx Ground trucks. After paying these expenses, a typical FedEx driver makes less than employee drivers at FedEx Ground’s competitors like UPS, and receives none of the employee benefits, like health care, workers compensation, paid sick leave and vacation, and retirement.

Category: Featured