FEDERAL EXPRESS CHANGES ITS BUSINESS MODEL DUE TO CHALLENGES TO INDEPENDENT CONTRACTOR STATUS OF ITS DRIVERS

Written on May 13, 2016.

As an essential part of its business model, over the years Federal Express (FedEx) has contracted with its drivers to deliver packages to its customers. The drivers must wear company uniforms, drive company-approved vehicles, and groom themselves according to the company's appearance standards. The company tells its drivers what packages to deliver, on what days, and at what times. Although drivers may operate multiple delivery routes and hire third parties to help perform work on those routes, they may do so only with the company's consent. FedEx has always considered its drivers to be independent contracts, and thus not subject to the labor and employment laws, including the Labor Act, the wage-hour laws, and the like.

Over the last 10 years, various lawsuits claiming employment status on the part of FedEx drivers have been filed in over 40 states. Many of the cases were consolidated in a single federal district court in Indiana, and the court there certified a class-action on the part of the drivers. Both sides moved for summary judgment seeking a judicial ruling for the status of the drivers as either employees or independent contractors, as a matter of law. FedEx was largely successful at the district court level, but on appeal, the Ninth Circuit Federal Court of Appeals found that the drivers were employees as a matter of law. Slayman v. FedEx Ground Package System, Inc., 23 W.H. Cases 2d. 301 (C.A. 9, 8/27/14)). The court reasoned that the drivers had employment status because of the "powerful evidence of FedEx's right to control its drivers," and that none of the other factors sufficiently favored FedEx to allow a holding of the plaintiffs as independent contractors.

In response to the ruling, FedEx officials stated that the business model at issue in the Slayman litigation was no longer in effect, and had been replaced by a business model in which FedEx only contracts with incorporated entities who directly employ the employees.