Court Catches FedEx Cheating Employees of Their Benefits

Originally published on August 29, 2014, at NationofChange.org

The Ninth Circuit Court of Appeals ruled that FedEx Corp. misclassified their employees as independent contractors to evade paying benefits. By classifying their drivers as independent contractors, FedEx unlawfully subjected their employees to repeated labor and wage violations. Seeking a rehearing by the entire Ninth Circuit, FedEx wishes to avoid potentially paying out hundreds of thousands of dollars in back wages, damages, and attorneys’ fees.

In the case known as Alexander v. FedEx Ground, a panel of federal judges determined that over 2,300 FedEx drivers in California and Oregon had been deprived of employee status and benefits. According to court documents, FedEx drivers were required to pay for their FedEx branded trucks, uniforms, insurance, fuel, tires, oil changes, maintenance, workers’ compensation coverage, and the wages of employees covering their shifts during vacations and sick days. The drivers were even forced to rent the scanners that record their deliveries and ended up trapped with expensive long-term leases on their FedEx branded trucks.

“We have heard of many instances where the secondary drivers are earning such low wages that they have to rely on public assistance to make ends meet,” stated the plaintiffs’ attorney Beth Ross. “Nationally, thousands of FedEx Ground drivers must pay for the privilege of working for FedEx 55 hours a week, 52 weeks a year. Today, these workers were granted rights and benefits entitled to employees under California law. To be clear, the Ninth Circuit exposed FedEx Ground’s independent contractor model as unlawful.”

By listing their employees as independent contractors, FedEx avoids federal and state tax withholding, anti-discrimination, fringe benefit, health care, overtime, workers’ compensation, paid sick leave, vacation, pension, retirement, and unemployment insurance obligations. As independent contractors, the drivers are not even covered under Obamacare. Even though FedEx drivers do the same work as UPS and U.S. Postal Service drivers, FedEx “independent contractors” receive substantially less pay and no benefits.

“We fundamentally disagree with these rulings, which run counter to more than 100 state and federal findings – including the U.S. Court of Appeals for the D.C. Circuit – upholding our contractual relationships with thousands of independent businesses,” said FedEx Ground Senior Vice President and General Counsel Cary Blancett in a recent press release.

On December 14, 2010, U.S. District Judge Robert Miller threw out the claims of FedEx drivers in 20 class-action cases in California, New Jersey, New York, and several other states. In South Bend, Indiana, Judge Miller had determined the drivers were correctly classified as independent contractors and not entitled to receive back wages, overtime, and other damages. In his decision, Judge Miller said, “FedEx doesn’t have the right to control the drivers’ means and methods of how they go about their work.”

According to California law, that statement is patently false. FedEx controls how drivers perform their work by forcing them to wear company uniforms, drive approved trucks, and follow company procedures. If the ruling stands, the FedEx drivers could receive at least $250 million in back pay and punitive damages.

As more companies like FedEx Corp. and Amazon.com, Inc. embrace the independent contractor model, one company has wholeheartedly rejected abusing its employees for profit. Market Basket CEO Arthur “Artie T.” Demoulas returns to work after being ousted when his cousin Arthur S. Demoulas gained control of the board in June. The departure of Artie T. sparked 6 weeks of strikes, boycotts, and protests.

After years of battling in court and even a fistfight between the warring cousins, Arthur S. Demoulas seized control of a board determined to amass a larger share of the profits. Board members had complained that Artie T. had ignored them and referred to them as greedy for wanting to cut employee benefits in order to reduce costs.

Extremely loyal to Artie T., Market Basket managers and employees went on strike for six weeks. Customers boycotted the stores, and suppliers refused to make deliveries until Artie T. was finally reinstated this week. Forced to sell their stocks, shareholders have given Artie T. a 50.5% stake in the company to assuage the boycott and protests.

“It’s a business model here that needs to be watched and copied,” stated Worcester Polytechnic Institute Professor Frank Hoy.

Known as a people person, Artie T. promotes from within his own company and forms personal connections with both customers and employees.  A compassionate CEO that inspires dedication and loyalty, Artie T. has developed a successful business model that would never classify employees as independent contractors.

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