Calif.: FedEx Agrees to Settle Drivers' Misclassification Claims for $228M

By Joanne Deschenaux Jun 18, 2015
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FedEx Ground Package System Inc. has reached a $228 million settlement agreement with approximately 2,300 drivers in California, resolving the drivers' claims that they were misclassified as independent contractors and are due wages and other benefits under California law (Alexander v. FedEx Ground Package Sys., Inc., N.D. Cal., No. 12-17458, settlement announced 6/12/15).

The settlement agreement, which is subject to approval by the U.S. District Court for the Northern District of California, will end years of litigation between the parties. The 9th U.S. Circuit Court of Appeals ruled on Aug. 27, 2014, that the drivers were employees, rather than independent contractors, under state law. The federal appeals court remanded the case to the district court with instructions to enter summary judgment for the drivers on the issue of employment status.

“FedEx Ground faced a unique challenge in defending this case given the decision of the Ninth Circuit Court of Appeals last summer,” Christine P. Richards, executive vice president and general counsel of FedEx Corp., said in a June 12 press release. “This settlement resolves claims dating back to 2000 that concern a model FedEx Ground no longer operates.”

Right to Control Was Key

The appellate court’s principal consideration in deciding independent contractor status was whether FedEx had the right to control the manner and means of accomplishing the desired result. The court agreed that the results FedEx sought were the timely and professional delivery of packages, but found that the requirements placed on the drivers by FedEx went beyond mere control of those results.

FedEx’s relationship with the drivers was governed by an operating agreement (OA)–which described the drivers as contractors–and various policies and procedures prescribed by FedEx. The OA required drivers to pick up and deliver packages within their assigned “Primary Services Area[s]” every day that FedEx was open for business. Drivers also were required to deliver every package they were assigned that day and within the specific time window negotiated between FedEx and its customers.

Drivers were expected to arrive at FedEx’s delivery terminal each morning and not leave the terminal until all of their packages were available for pick-up, as well as to return to the terminal at a set time at the end of the day. Although FedEx did not expressly dictate the drivers’ working hours, it did structure the drivers’ workloads to ensure that they worked between 9.5 and 11 hours every working day. FedEx managers also ensured that drivers properly filled out their delivery paperwork, and after each delivery, the drivers were required to use an electronic scanner to send data about the delivery to FedEx.

In addition, drivers were required to follow FedEx’s “Safe Driving Standards,” and a driver’s manager could conduct up to four ride-along performance evaluations each year to verify that the driver was meeting FedEx’s customer service standards. Drivers were required to provide their own vehicles, but all vehicles had to be approved by FedEx with regard to specific dimensions, colors, logos, numbers, marks and insignias. FedEx also required drivers to comply with personal-appearance standards and wear a FedEx uniform, including a uniform shirt and pants (or shorts), and, if worn, a uniform jacket and cap, all of which bore the FedEx logo. Managers could refuse to let drivers work if they or their vehicles did not meet these requirements.

The OA allowed drivers to operate more than one vehicle and route, but only with FedEx’s consent and only if consistent with the capacity of the FedEx terminal. Drivers also could hire third parties to help perform their work, but those helpers were required to be “fully trained” under and “conform fully” to the OA. Furthermore, only drivers “in good standing” under the OA could assign their routes to replacement drivers–and only if such replacement was “acceptable to FedEx.”

The court observed that California’s right-to-control test did not require “absolute control,” and that FedEx’s lack of control over some parts of its drivers’ jobs did not counteract the extensive control it did exercise. The court found that FedEx exercised “all necessary control” over its delivery drivers.

Joanne Deschenaux, J.D., is SHRM’s senior legal editor.

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