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Ninth Circuit ruling says FedEx Ground misclassified drivers

August 28, 2014

The Ninth Circuit Court of Appeal ruled FedEx Ground, a subsidiary of FedEx Corp. (NYSE: FDX), misclassified a class of 2,300 drivers as independent contractors instead of employees, law firm Leonard Carder announced. The case is Alexander v. FedEx Ground; it covers workers at FedEx Ground in a period from 2000 to 2007. FedEx announced it disagreed with the ruling and will seek a review of the decision and reported it had updated its operating agreements prior to the ruling.

The court ruled the plaintiffs were employees as a matter of law under California’s right-to-control test.

Leonard Carder says the lawsuit impacts one of FedEx Ground’s largest workforces and could influence the outcome in more than two dozen cases nationwide in which FedEx Ground drivers are challenging their status as independent contractors.

“FedEx Ground built its business on the backs of individuals it labelled as independent contractors, promising them the entrepreneurial American Dream,” said Attorney Beth Ross, who represents the drivers. “However, as Judge Trott said in his concurring opinion, not all that glitters is gold.”

If the decision is upheld, FedEx may owe its workforce of drivers hundreds of millions of dollars for 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, according to law firm Leonard Carder, which represents the drivers.

FedEx said the decision — by a three-judge panel — 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 independent contractors operating in California from 2000-2007 and Oregon from 1999-2009 were employees according to the panel’s interpretation of state laws, the company said. The model that the court reviewed is no longer in use, according to FedEx. The company has since 2011 only contracted with incorporated businesses — which treat their drivers as their employees, it said.

FedEx also announced it will seek review of these decisions, including review by the entire Ninth Circuit.

“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.”