Most FedEx Ground Drivers Aren't FedEx Employees, Court RulesRight now, millions of Christmas presents are zooming around the country in the back of FedEx (FDX) trucks -- driven, one might think, by FedEx employees. However, it turns out the employment status of those drivers depends on which state they are working in, and according to a judicial ruling issued Tuesday, most of them are independent contractors.

In a consolidated class action challenging FedEx Ground's contractor business model, U.S. District Court Judge Robert Miller Jr. found that most of those drivers are contractors, not employees, meaning they're responsible for their own expenses and benefits. It also means they lose access to important worker protections. However, the laws of a handful of states do classify the drivers as employees.

Back in May, Judge Miller found Illinois law dictates that drivers there be classified as employees. But in August, he ruled Kansas drivers are contractors. Tuesday's decision resolved most of the remaining cases with findings that FedEx Ground drivers were employees in only three other states: Kentucky, Nevada and New Hampshire.

Only Employees Can Unionize

In analyzing the workers' status, Miller focused on how much control FedEx had over the drivers. The judge considered several factors: FedEx can't fire the drivers at will, as it typically could with employees; drivers have the autonomy to hire helpers and sell their routes; and the drivers have to purchase and maintain their own trucks. Overall, the judge gave FedEx wins in 20 of the 28 class-action cases. The remaining eight will continue toward trial.

One big issue lurking inside these cases is unionization. Employees have unionization rights that independent contractors lack. Drivers for FedEx's main rival, UPS, are represented by the Teamsters Union, and the nonunion status of FedEx's drivers gives it a big cost advantage over UPS (UPS).

Even in those states where the drivers were ruled to be employees, unionizing is unlikely to be easy. Nevada is a "right to work" state, which makes unionization difficult, and union membership nationwide is at record lows. Given how stagnant wages have been, and how tough today's economy is, that low level of unionization is striking.

An Admittedly Limited Ruling

In the cases where the workers were ruled to be employees, or where they raised other legal issues not resolved on Tuesday, the possibility of a win -- much less a payday from any victory -- is a long way off. The cases are at a very early stage -- so early, in fact, that Miller began his opinion in a slightly tsk-tsk tone, noting that the evidence was so limited for his rulings that the rulings' effect had to be considered limited, too.

Specifically, he noted that if a FedEx Ground driver runs someone over, the company could still be liable on the basis that the driver is an employee -- even in the states where he'd held they weren't employees for the purposes of these suits. Similarly, drivers injured while working might also be able to claim employee status.

As a result, FedEx can't rely on Tuesday's order as a blanket protection against any future type of employee liability. Indeed, Judge Miller titled that introductory section of his opinion "Decisions Won't Preclude Most Future Litigation Concerning Employment Status of FedEx Ground Drivers." Even so, the Tuesday wins were "huge" for FedEx, according to at least one analyst following the company.

Increase your money and finance knowledge from home

Investing in Startups

The lucrative and risky world of startups.

View Course »

Investor’s Toolbox

Improve your investing savvy with the right financial toolset.

View Course »

Add a Comment

*0 / 3000 Character Maximum


Filter by:

Big business owns all politicians...that's why the rest of america is going broke! That's why we bailed out the car industry, the banking industy etc...wasn't for you and me! Also how many times do you hear about a politician doing something wrong, not paying taxes many of them ever go to jail? How many stories have you read about us buying toilet seats for thousands of dollars or hammers for hundreds of dollars? How many follow up stories have you read about how they had to pay that money back? America needs to wake up and ask ourselves why we are allowing a crooked group of about 1 to 2 thousand people to make the laws and take the money for and from the rest of us. They are lying thieves. Short of a revolt against them the only thing we can do is insist on term limits and hold their feet to the fire when they do something that goes against the grain of what america stands for.....freedom, and the right to work hard and prosper.......and on 1 last note......notice how when they pass laws it applies to the rest of us but not them?

December 15 2010 at 7:52 PM Report abuse +1 rate up rate down Reply

Maybe it's time for the truckers to go on strike? Or leave the company for others.

December 15 2010 at 4:11 PM Report abuse rate up rate down Reply

It looks like this decision muddies the Legal & Liability issues even more. I know FEDX purpose is to limit their costs and expenses and make the poor driver employees shoulder all the expenses. Seems like the fair way would be to have them classified as an employee, which they really are. If it looks like a duck, walks like a duck sounds like a duck and smells like a duck, must be a duck as my father used to say. There is or was legislation to have them classifed as an employee, but don't know what the status of that is, but most likely not going to happen as FEDX pretty much owns the two senators from Tennessee.

December 15 2010 at 4:06 PM Report abuse +2 rate up rate down Reply
Caption Cook

If any of the FedEx ground drivers are in a bad accident,who would carrie the legal expence. Who is intrusted with the package?

December 15 2010 at 1:33 PM Report abuse +2 rate up rate down Reply

It is difficult for me to believe that a major company like FedEx would have woven such a tangled web of employees/contractors. Now, however, they will have to deal with the Courts in untangling them. Perhaps it is a sign of the times that a delivery truck driver is so desperate for work that he/she would actually buy his/her own truck and effectively, go into business as a contractor/driver. I, for one, would have to have a pretty solid multi-year contract offer in hand before I would shell out $50K to $100K or more for a truck.

December 15 2010 at 12:44 PM Report abuse +3 rate up rate down Reply