Judge Dismisses FedEx Drivers’ ERISA Claims

June 30, 2010 (PLANSPONSOR.com) - A federal judge has dismissed former FedEx drivers’ Employee Retirement Income Security Act (ERISA) claims for failure to exhaust administrative remedies.

U.S. District Judge Robert L. Miller, Jr. of the U.S. District Court for the Northern District of Illinois disagreed with the plaintiffs’ assertion they are excused from exhausting their administrative remedies under six employee benefit plan documents because they were denied meaningful access to administrate review, and it would have been futile to bring their claims before FedEx or FedEx’s designee when FedEx has consistently taken the position that the plaintiffs aren’t entitled to any plan.  

Miller said the lack of meaningful access exception is available when a defendant denies the plaintiff’s claim for benefits, and either the defendant refuses access to available appeal procedures or the plaintiff is unaware of any available review procedures. The drivers contend FedEx denied them meaningful access to administrative review because it didn’t comply with ERISA notice statutes: They weren’t provided plan documents and FedEx didn’t notify them that they had the right to challenge their designation as independent contractors through an internal appeals process. 

However, the court pointed out that procedural and notification requirements aren’t triggered until the plan administrator denies a claim, and the drivers never made a claim.  

The drivers argued there is little point in requiring administrative review since FedEx has aggressively and consistently defended its independent contractor business model, so any claim by a plaintiff for benefits under any of the plans would be rejected. However, Miller said: “Merely showing that FedEx is predisposed to deny the plaintiffs’ claims and has consistently taken that position in this lawsuit isn’t sufficient to show by certainty that the claims would be denied.”  

In 2007, Miller granted class action status to a string of lawsuits claiming that the control the company exercises over its drivers makes them employees who are eligible for benefits, not simply contract workers (see Judge Grants Class Action Status to FedEx Ground Drivers).  The drivers brought their actions against FedEx pursuant to ERISA’s denial of benefit provision, 29 U.S.C. § 1132(a)(1)(B) (ERISA § 502(a)(1)(B)), claiming FedEx violated ERISA by misclassifying them as independent contractors instead of employees and wrongfully denied them the right to participate in six different employee benefit plans.  

In December of that year, FedEx announced that the Internal Revenue Service tentatively concluded that the drivers were misclassified as independent contractors (see IRS Says FedEx Misclassified Workers).  

The case is In re FedEx Ground Package System Inc. Employment Practices Litigation, 3:05-md-00527.