FedEx Wins Ruling That Contract Drivers Seeking Benefits Aren't Employees

FedEx Corp. drivers were found by a judge to be independent contractors in a nationwide series of lawsuits claiming the company treats them as employees and owes them full benefits.

U.S. District Judge Robert Miller in South Bend, Indiana, yesterday threw out claims of drivers in 20 class-action cases in California, New York, New Jersey and other states alleging the company misclassified their employment status and owed them back pay, overtime and other damages.

“We are very pleased with today’s significant rulings from the federal District Court in Indiana,” Maury Lane, a FedEx spokesman, said yesterday in an e-mail. FedEx, based in Memphis, Tennessee, is the second-largest U.S. package-shipping company after United Parcel Service Inc.

FedEx saves money by using contractors because it doesn’t offer them the same benefits and vacation time as it does employees. The company has encouraged its contractors to consolidate routes and hire their own subcontractors in an effort to bolster its position that the workers are small- business owners and not employees.

The contractor model gives FedEx’s Ground unit a cost advantage of as much as 30 percent over Atlanta-based UPS, University of Pittsburgh business professor Marick Masters has estimated.

Miller found that the drivers are independent contractors in 20 of the 28 remaining group lawsuits, and ruled in favor of FedEx on some claims in the other eight class-action cases, Lane said. In three cases, the court ruled against FedEx on at least one claim, he said.

Lynn Faris, an attorney for the drivers, didn’t immediately return a voice-mail message.

Multi-District Litigation

The cases are part of a so-called multidistrict litigation, which allows suits filed in courts around the U.S. to be consolidated before a single judge for pretrial hearings.

Miller’s ruling addresses whether drivers showed they were misclassified under each states’ laws. In New York, for instance, whether an employment relationship exists turns on the degree of control the purported employer has over workers.

“FedEx doesn’t have the right to control the drivers’ means and methods of how they go about their work,” Miller said in the decision. “FedEx’s results oriented controls don’t result in employee status.”

The case is In re FedEx Ground Package System Inc. Employment Practices Litigation, 3:05-md-00527, U.S. District Court, Northern District of Indiana (South Bend).

To contact the reporter on this story: Karen Gullo in San Francisco at kgullo@bloomberg.net.

To contact the editor responsible for this story: David E. Rovella at drovella@bloomberg.net.

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