Ninth Circuit Holds FedEx Drivers are Employees, Not Independent Contractors

Many will be surprised to learn that for years FedEx has treated its delivery drivers as independent contractors rather than as normal employees. Why you ask?

The answer is simple: Money.

FedEx avoided health care costs, workers compensation insurance payments, paid sick leave and vacation, retirement costs and more. FedEx made drivers pay for their  FedEx-branded trucks, FedEx uniforms, and those little hand-held scanners they use. And don't forget fuel, insurance, tires, oil changes, maintenance, even workers' compensation coverage.

That all adds up to a lot of money. And that's why yesterday's decisions out of the Ninth Circuit Court of Appeals are such a big deal. A three-judge panel of the appeals court ruled that FedEx drivers were employees “as a matter of law" under both California and Oregon law and “FedEx’s labeling of the drivers as ‘independent contractors’ in its operating agreement did not conclusively make them so.”

While I do not practice in California or Oregon, the tests at issue in these decisions do not appear all that different from the tests most other states that I am familiar with use to determine employee vs. independent contractor issues. And that fact could spell big trouble for FedEx and other employers attempting this strategy.

These decisions are part of a slowly-increasing level of scrutiny from the courts towards corporate efforts to save money by characterizing front-line workers as independent contractors and thus avoid normal employment costs.  In another recent decision, the National Labor Relations Board’s general counsel issued an opinion deciding to treat McDonald’s Corp. as a joint employer of its franchisees’ fast-food workers for the purposes of NLRB violation claims.

FedEx has already indicated that it plans to appeal these decisions.