Court Says FedEx Misclassified Workers as Contractors

December 30, 2005 ( - FedEx has been ordered to pay $5.3 million to a group of drivers classified as independent contractors, for expenses incurred.

Los Angeles County Superior Court Judge Howard Schwab said FedEx had violated California law by classifying all of its single-route drivers as independent contractors, forcing them to incur expenses for fuel, oil, tires, repairs and liability insurance that the company should have covered.  According to The Reporter, Schwab ordered FedEx to pay $5.3 million to the group of misclassified drivers.   Each of the 200 class members of the suit will receive payments ranging from a few hundred dollars to as much as $98,000.

He also ordered FedEx to end the practice, instructing the company to provide drivers with a copy of his December 19 order.   The company has until April 5 to comply with Schwab’s order, according to the news report.

Similar claims from FedEx drivers in a series of 32 suits, filed in 25 states, have been consolidated in Indiana.

FedEx spokesman David Westrick said the company plans to appeal. “We firmly believe that the 14,000-plus men and women we have around the country understood the terms of the contract when they signed it,” he said, according to the Reporter.   FedEx argued in court that, while it sets work rules for some contractors, they aren’t employees because they don’t have set start times, they can hire and fire workers, they use their own vehicles, and they choose their own routes.

Lead plaintiff attorney Lynn Faris said she expects the ruling to have a broader affect on the courier industry, whose employment classification arrangements have attracted increasing scrutiny from state regulators and the attorney general’s office over the past few years.   “[The decision] has very broad national implications for a big company that has chosen to do business in a way that is inconsistent with California law,” she said, according to the report.

In response to complaints that courier companies have released hourly workers and then hired them back as contractors who are paid to deliver packages using their own vehicles, California’s Employment Development Department has said it plans to audit an additional 450 delivery companies by July.