Court Backs FedEx Claim on Mass. Drivers
This story appears in the April 27 print edition of Transport Topics.
FedEx Corp.’s package delivery unit won a victory in its ongoing battle over the classification of its drivers when a federal appeals court ruled April 21 that a handful of Massachusetts drivers were wrongly classified as employees with the ability to unionize, instead of as independent contractors.
The decision by a panel of the U.S. Court of Appeals for the District of Columbia said that while both sides had valid points, “the evidence supporting independent contractor status is more compelling.”
“The ability to operate multiple routes, hire additional drivers (including drivers who substitute for the contractor) and helpers and to sell routes without permission . . . augurs strongly in favor of independent contractor status,” the court said.
The lawsuit arose from a 2006 effort by the Teamsters union to organize two FedEx Ground terminals in Massachusetts. Though the union was able to win two National Labor Relations Board-sanctioned elections, FedEx refused to bargain with the Teamsters, saying the workers were contractors and not employees, and therefore could not organize.
The NLRB ruled the workers were employees and therefore had the right to organize, and FedEx challenged that decision in federal court.
The Memphis, Tenn., company, ranked No. 2 on the Transport Topics 100 list of the largest for-hire carriers in the United States and Canada, has been under pressure from unions and Congress over its contractor-based model.
“The court determined that the company had provided clear
evidence that FedEx Ground contractors are properly classified as independent contractors,” FedEx spokesman Maury Lane said in a statement. “Court decisions like this and a recent state court decision in Washington State . . . confirm that FedEx Ground contractors are independent business owners who choose to own and operate their own enterprises as they like.”
Bob Digges, deputy general counsel for American Trucking Associations, said the decision was good for the trucking industry, which depends heavily on the use of contractors or owner-operators.
“It’s a good case for the trucking industry broadly because it’s an area where the court reaffirmed the use of common law test for distinguishing between employees and independent contractors,” Digges said.
Digges added that the court “reiterated a lot of the things that we’ve been saying” about independent contractors, namely that forcing drivers to comply with federal regulations “doesn’t represent employee-type control; it is the law that’s doing the controlling.”
Ken Hall, director of the Teamsters Package Division, said the union was “disappointed in the court’s decision to deprive FedEx drivers of the right to form unions and bargain for better working conditions and wages.”
Hall added that the union was “confident that the decision will not survive review by the full court or by the U.S. Supreme Court,” but did not say whether it would pursue such a review.
FedEx faces several other cases relating to employee classification, including a national class-action lawsuit in U.S. District Court in Indiana that has yet to be fully argued.
Analyst Ed Wolfe of Wolfe Research wrote in a note to in-vestors that the ruling was “a modest positive” for FedEx, because the company now “has arguably a federal appeals court precedent it can point to in other cases, that involves a determination in some manner on the status of its Ground drivers.”
However, he added that he believes “that the Ground contractor status issues are likely to persist for FedEx and that they will have a very difficult time fighting this battle on multiple fronts, including state and federal courts, and multiple state and federal agencies, such as this current decision that originated with the NLRB.”
FedEx seemingly needs to win all the cases in every venue, while even one Ground contractor decision against FedEx can force FedEx to materially change its operations, Wolfe said.
