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Federal Judge says FedEx Ground independent contractors are not employees

By Jeff Berman, Group News Editor
August 25, 2010

FedEx received good news last week, when a federal judge in Indiana ruled that FedEx Ground drivers in Kansas are independent contractors and not full-time employees.

This verdict by Judge Robert Miller also ordered all drivers suing FedEx on this same matter to submit written arguments stating why their outcome should be different by September 10.

In his decision, Miller noted that the independent contractors have signed operating agreements indicating they are independent contractors whom can hire others to perform their assigned work and go work for another delivery company and sell their routes to other qualified employees and still maintain they are FedEx employees.

But he added that this argument does not stand up because FedEx has not retained the right to direct the manner in which drivers conduct their work, coupled with the fact that thee is no evidence under the operating agreement that FedEx has the authority to require independent contractor compliance with its suggestions and best practices for the performance of assigned tasks.

Other factors weighing into Judge Miller’s decision that support independent contractor status include: drivers have the ability to hire staff and replacement drivers, are responsible for acquiring a vehicle and can use the vehicle for other commercial purposes, they can sell their routes to other qualified drivers, and FedEx does not have the right to terminate contracts at-will.

This development follows a decision made in U.S. District Court in Boston earlier this month in which 31 current and former FedEx drivers sued FedEx for improperly classifying them as independent contractors instead of employees, according to a Reuters report.

And in July FedEx Ground paid the Massachusetts Attorney General’s Office $3 million in a dispute over alleged misclassification of drivers as independent contractors, according to the Boston Globe. The report said that Massachusetts contends the package delivery company’s actions denied the state payroll taxes, worker’s compensation and unemployment assistance contributions, as well as gain an unfair competitive advantage.

In a previous interview with LM, Hempstead Consulting President Jerry Hempstead said that rulings like the one by Judge Miller are a positive for FedEx in its argument that the drivers for their ground operation are in fact not employees of FedEx but independent businessmen who provide pick up and delivery services for FedEx ground and FedEx Home Delivery.

“This in no way is the end of the litigation,” cautioned Hempstead. “Several more states have piled on of late claiming that the drivers are FedEx employees. If it were ever ruled that they are in fact FedEx employees, it could significantly increase the company’s operating expense, which would then be passed onto shippers as higher prices. For now there is no immediate threat of that.”

About the Author

Jeff Berman headshot
Jeff Berman
Group News Editor

Jeff Berman is Group News Editor for Logistics Management, Modern Materials Handling, and Supply Chain Management Review. Jeff works and lives in Cape Elizabeth, Maine, where he covers all aspects of the supply chain, logistics, freight transportation, and materials handling sectors on a daily basis. .(JavaScript must be enabled to view this email address).


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