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FedEx Court Decision Is a Wake-Up Call

A California judge has ruled that FedEx Ground “purposely created controls of an employment nature, hoping that in spite of those strictures, the status would still be seen and considered to be that of an independent contractor.”

May 29, 2004
Related Topics: Staffing and the Law, Contingent Staffing, Recruitment

Lawyer Jules Sandford of Monrovia has been getting calls from other attorneys and state officials around the country since July, when a California judge ruled that certain FedEx Ground contract workers should be treated as employees.

    Sandford represents FedEx Ground contract drivers who sued in state court to recover expenses, overtime and other amounts.

    While the ruling applies only to a small group of FedEx Ground workers in California--the company says the total is fewer than 80 out of more than 17,000 contract drivers nationwide--it still serves as a wake-up call to FedEx and to other companies trying to expand the use of contract workers.

Multiple routes
    FedEx Ground pays its contract drivers based on how many pickups and deliveries they make. The drivers use trucks bearing FedEx colors and logos, wear FedEx-style uniforms and serve customers of FedEx Ground. But the drivers own their own trucks and must pay for their uniforms, supplies, gas, maintenance and other costs. They get no company benefits.

    A FedEx contract generally covers one route. Contractors can have up to four contracts--and thus four routes--and hire their own drivers.

    In his July 26 ruling, Los Angeles County Superior Court Judge Howard J. Schwab deemed those with multiple routes to be legitimate contractors who operate more like businesses than employees. But he decided that single-route contractors, which he termed a Single Work Area (SWA), should be classified as employees. Damages will be decided later. FedEx, which has successfully defended its contractor system in other cases, says it plans to appeal the ruling.

    Here are some excerpts from Schwab’s ruling:

  • "The court makes no value judgment as to whether independent contractor or employee status is a better business model or more beneficial for society. The court agrees with FEG (FedEx Ground) that independent contractor status is a legitimate and acceptable mode of commerce."

  • "A close reading of the Operating Agreement, which all SWAs must sign in order to be able to work for FEG, is comprised primarily of platitudes and guidelines."

  • "As will be shown, the right to interpret the Operating Agreement and other matters is in the sole hands of FEG. By leaving such subjective interpretation to the discretion of management, the relationship between the SWAs and FEG ceases to be a partnership, metamorphosing into a tightly controlled hierarchical employment model."

  • "The lack of objective, precisely defined guidelines either reflects a totally disorganized business, which FEG certainly is not, or a highly motivated, well-organized entity, which it is, that utilizes control and order to meet its successful economic goals. Thus, FEG unilaterally ordered its SWAs to work the Friday after Thanksgiving, which it had never done before, in order to be competitive with other package delivery services."

  • "Of importance to the court is the clear evidence that SWAs are totally integrated into the FEG operation...The SWAs wear required uniforms and drive specifically mandated FEG logo-laden trucks. The SWAs are long term in years of service..."

  • "For all practical purposes, by the nature of their work, the SWAs are engaged in the exclusive and full-time pickup and delivery service for FEG and are identified as such. FEG also provides business cards for the SWAs with its logo."

  • "Most important of all, the court finds that the work of the SWAs is essential for FEG’s core operation, the pickup and delivery of packages. If lightning were to strike so that there were to be no FEG, there would in fact be nothing left for the SWAs to do and they suddenly would be bereft of business."

  • "The court finds that in entering the relationship, FEG purposely created controls of an employment nature, hoping that in spite of those strictures, the status would still be seen and considered to be that of an independent contractor."

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