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Jun
2016
24

FedEx Ground Settles Decade-Old Misclassification Case: $240M Across 20 States

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For over 10 years, FedEx Ground has been battling claims that it misclassified its drivers as independent contractors. But they finally settled.

Late last week the company announced a $240 million payout spanning 20 states. The cash will be divided between more than 12,000 ground division drivers. According to the lead lawyer for the plaintiffs, some drivers could receive tens of thousands of dollars.  

The drivers’ argument was based on the amount of control the company had over them when they were allegedly acting as independent contractors. Drivers were required to use company-branded trucks, wear FedEx uniforms, and use FedEx scanners. But they were often stuck with expenses that would be reimbursed by an employer in a traditional employer-employee relationship. The move allowed FedEx to save on taxes, fringe benefits, health care costs, and pensions.

The drivers understood that continuing to litigate, rather than settle, could have cost them years:

“If the litigation were to continue … a final resolution would be several years away, and would require significant time and expense to resolve the complex liability and damages issues presented.”

FedEx Ground’s misclassification fight has been a long one:

The legal landscape for FedEx was mixed until August 2014. Prior to that time, FedEx had won a number of its earlier IC legal skirmishes and lost some. But, all that changed when the Ninth Circuit Court of Appeals in San Francisco slapped down FedEx in a blockbuster decision on August 27, 2014, concluding that FedEx misclassified its Home Delivery and Ground Division drivers as independent contractors as a matter of law. That decision was followed only five weeks later by a similar decision from the Supreme Court of Kansas, and the Kansas decision was then adopted in July 2015 by the Seventh Circuit Court of Appeals in Chicago. All of those decisions reached the same conclusion: “FedEx has established an employment relationship with its delivery drivers but dressed that relationship in independent contractor clothing.”

Settlements have been plentiful of late. Over 2,000 current and former drivers in the state of California took $228 million back from FedEx last year, and is expected to ultimately affect companies like Uber and Lyft whose business is built on misclassification.  In April, 385,000 Massachusetts and California drivers received $100 million in a settlement from Uber.

FedEx stopped working directly with independent contractors in 2011, instead contracting third parties to employ its drivers and shield itself from the law.  

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