Labor & Employment

'Seismic' 9th Cir. rulings nix FedEx claim its drivers aren't employees, could cost company millions

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In a significant victory for FedEx drivers who contend they have been misclassified as independent contractors, a federal appeals court on Wednesday reversed a finding in multidistrict litigation in Indiana and held that nearly 2,700 plaintiffs in California and Oregon are in fact employees.

In separate decisions concerning the California (PDF) and Oregon (PDF) federal district court cases, the San Francisco-based 9th U.S. Circuit Court of Appeals reversed a grant of summary judgment for the defendant company and remanded to the respective district courts with instructions to enter summary judgment for the plaintiff drivers on the issue of their employment status, Courthouse News reports.

Under a “right to control” test that applies in both states, the FedEx drivers are clearly employees, not independent contractors, a three-judge appellate panel held.

“The drivers must wear FedEx uniforms, drive FedEx-approved vehicles, and groom themselves according to FedEx’s appearance standards,” wrote Judge William Fletcher in both opinions. “FedEx tells its drivers what packages to deliver, on what days, and at what times. Although drivers may operate multiple delivery routes and hire third parties to help perform their work, they may do so only with FedEx’s consent.”

The fact that FedEx called the drivers independent contractors in an operating agreement did not change their actual status as employees, the court said.

FedEx plans to seek en banc review by the 9th Circuit of the three-judge panel’s decision, the company said in a written statement provided to Courthouse News. The company has also used a different operating agreement since 2011, and now contracts with independent companies that treat their drivers as employees.

“We fundamentally disagree with these rulings, which run counter to more than 100 state and federal findings … upholding our contractual relationships with thousands of independent businesses,” said Cary Blancett, senior vice president and general counsel of FedEx Ground. “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.”

By retaining independent contractors to perform work instead of employees, companies can potentially save a lot of money that would go toward overtime pay and other benefits such as social security. FedEx also has reportedly required its drivers to pay for their own uniforms and trucks. But if companies are determined to have misclassified employees as independent contractors, they can wind up paying not only the original employee costs they avoided but substantial penalties, as an earlier post about the FedEx litigation details.

“This ruling will have seismic impact on this industry and the lives of FedEx Ground workers in California,” said attorney Beth Ross of Leonard Carter, in a written statement provided to the Sacramento Business Journal. She represents plaintiffs in the case.

If today’s 9th Circuit rulings stand, FedEx could be looking at millions of dollars in damages for overtime pay, back pay for missed meal and rest periods and compensation for worker-provided equipment, the article notes.

Oral arguments in the appeals were heard in Portland, Oregon.

Related coverage: “Claims of ‘wage theft’ spark movement to increase federal enforcement, require detailed pay stubs”

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