Federal Express is facing a looming legal battle over whether it can classify its drivers as independent contractors or as employees, as the company’s Ground Package division faces a nationwide class action suit by truck drivers, who are suing under the Employment Retirement Income Security Act (ERISA) for allegedly misclassifying the employees as contractors.
The drivers are seeking benefits under several plans for which they were not eligible, because they were designated as independent contractors when hired by Federal Express. The class of plaintiffs includes more than 20,000 current and former drivers, who had signed operating contracts declaring them to be contractors. The lawsuit claims that FedEx had control over the workers as employees, which would not allow them to be designated as independent contractors. If the drivers are deemed to be employees, they would be eligible for a variety of rights and benefits, including: overtime compensation, retirement benefits, and health insurance. Indeed, a finding of employee status for these drivers would be dramatically expensive for FedEx.
Federal Express also faces a separate legal battle with its California-based drivers. Following a California appellate court decision, which determined that FedEx single-route drivers were in fact, employees, FedEx has elected not to renew driver single-route contracts, and would only work with multiple-route contractors. Not surprisingly, the drivers have now alleged retaliation. FedEx has offered its single-route drivers various incentives to either take up more routes or to sell their routes. This case is significant because at least 75% of FedEx’s 12,000 drivers are single-route contractors; therefore, any rulings could have adverse affects on FedEx, and the industry as a whole.
Class actions suits involving drivers are becoming a rapidly growing area of litigation, as there are currently 35 pending rulings on class certification for drivers under both state and federal laws, as more and more drivers are challenging their employment classification status. It is incumbent upon companies in all industries to make sure that they understand when an individual is an employee and those (often limited) circumstances when individuals are “really” independent contractors. This FedEx litigation highlights the problems and the potential exposures for misclassification of employees as “independent contractors.”