FedEx “Independent Contractor” Misclassification

Classifying employees as independent contractors rather than employees can give employers a significant advantage. In addition to avoiding certain responsibilities, such as workers’ compensation, health insurance, and providing other employee benefits, employers can also escape other legal liabilities.

Classifying employees as independent contractors rather than employees can give employers a significant advantage. In addition to avoiding certain responsibilities, such as workers’ compensation, health insurance, and providing other employee benefits, employers can also escape other legal liabilities. In a recent case, the Ninth Circuit has ruled that FedEx misclassified more than 3,000 delivery drivers as independent contractors rather than employees. The results of this case could have a significant impact nationwide for companies that use independent contractors as drivers. According to the court, the decision could “unravel” the entire business model for the company.

In the decisions involving FedEx drivers in California and Oregon, FedEx forced drivers to purchase company approved trucks, uniforms and other equipment as though they were independent contractors. Despite giving the appearance of independent business ownership and operation, the company controlled the minute details of appearance, behavior, and work schedule. FedEx described the arrangement as part of the “operating agreement” and defends the independent contractor arrangement, claiming that it did not control routes or in what order packages should be delivered. The lower court found that the drivers were independent contractors, while the Ninth Circuit reversed, finding the drivers to be “employees” in accordance with state law definitions.

The Ninth Circuit used the “right-to-control” test to determine whether the drivers were independent contractors or employees. This test analyzes whether the company had the right to control the manner and means of accomplishing results. According to the court, FedEx maintained control over how drivers performed their job duties, including their appearances, the appearances of the trucks, the times that drivers were allowed to work and complete their tasks, and the schedule for packages to be delivered. While FedEx allowed some flexibility, the court determined that the extent of control FedEx had over the employees qualified an “employer-employee” relationship.

Some courts use the “entrepreneurial opportunities” test to evaluate employee status; however the Ninth Circuit found the test irrelevant. Under this test courts will evaluate whether alleged independent contractors have significant entrepreneurial opportunities for gain or loss. The Ninth Circuit also found other evidence of employee status, including the right to terminate the contract at will and control over specific tools and equipment. Though the decision will only directly impact employers in California and Oregon, the decision may likely apply in other jurisdictions where employees claim they have been misclassified.

If you believe that you have been misclassified as an independent contractor, our employment attorneys want to hear from you. At Wanta Thome PLC we have substantial experience representing employees in FLSA litigation. For more information about independent contractor versus employee classification, please call 612-252-3570.