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Court rules FedEx Ground drivers employees, not independent contractors, reverses earlier finding

An attorney for plaintiffs in the suit said, “This ruling will have seismic impact on this industry and the lives of FedEx Ground drivers in California.” (The Trucker file photo)

The Trucker News Services

8/27/2014

FedEx Ground, a subsidiary of FedEx Corp., said today that a decision by a three-judge panel of the United States Court of Appeals for the Ninth Circuit reversed previous rulings by the District Court for the Northern District of Indiana in three class-action cases involving mostly former independent contractors for FedEx Ground.

The court held that those independent contractors operating in California from 2000 to 2007 and in Oregon from 1999 to 2009 were employees according to the panel’s interpretation of state laws, MSN Money reported.

 The model that the court reviewed is no longer in use. Since 2011, FedEx Ground has only contracted with incorporated businesses, which treat their drivers as their employees. FedEx Ground will seek review of these decisions, including review by the entire Ninth Circuit, the report stated.

“We fundamentally disagree with these rulings, which run counter to more than 100 state and federal findings — including the U.S. Court of Appeals for the D.C. Circuit — upholding our contractual relationships with thousands of independent businesses,” said FedEx Ground Senior Vice President and General Counsel Cary Blancett. “The operating agreement on which these rulings are based has been significantly strengthened in recent years, and we look forward to continuing to work with service providers across our network to provide customers the industry’s most reliable service.”

“In light of legal and regulatory developments in several states, FedEx Ground has taken a number of steps in recent years to enhance its operating agreements with the independent businesses that contract with the company to provide transportation services. As the latest step in this ongoing effort, FedEx Ground said it will transition to new independent service provider agreements in the states of California, Oregon, Washington, and Nevada,” the company said.

Currently, FedEx Ground contracts with more than 550 businesses that provide pickup and delivery service in California. Those businesses averaged nearly $500,000 in revenue last year, with nearly 50 of them topping $1 million or more in earnings. In Oregon, more than 100 independent businesses provide services for FedEx Ground.

“Small businesses are the foundation and growth engine of the U.S. economy, and we are proud of our long-standing contractual relationship with these service providers — each of which agrees to treat their personnel as employees and to comply with all applicable federal and state laws,” said FedEx Ground Vice President of Contractor Relations Sean O’Connor. “We remain committed to maintaining a business model that has been proven successful for our customers, service providers, and shareowners.”

The Leonard Carder labor law firm, which represents the plaintiffs, said a class of 2,300 individuals working for FedEx Ground was misclassified as independent contractors instead of employees and that FedEx may owe its workforce of drivers “hundreds of millions of dollars for … 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 ruling can be found on the Leonard Carder website at leonardcarder.com.

The majority opinion stated that: “We hold that plaintiffs are employees as a matter of law under California’s right-to-control test.”

According to the law firm, the court’s finding “ … could influence the outcome in over two dozen cases nationwide in which FedEx Ground drivers are challenging the legality of their independent contractor classification. …” 

“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.  “However, as Judge Trott said in his concurring opinion, not all that glitters is gold.”

“The Alexander decision calls into question FedEx’s strategy of making plaintiffs the middle men between the secondary workforce of drivers and FedEx,” Ross said.

Ross added, “This ruling will have seismic impact on this industry and the lives of FedEx Ground drivers in California.”

The Trucker staff can be reached to comment on this article at editor@thetrucker.com.

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