FedEx to Appeal Decision in Case About Independent Contractors -- 3rd Update

By Maria Armental

FedEx Corp. (FDX) on Wednesday said it intends to appeal a federal court decision that drivers the company had classified as independent contractors were employees.

The three-judge panel's decision, which would be appealed to the full U.S. Court of Appeals for the Ninth Circuit, would make FedEx responsible for work-related expenses and unpaid wages to those workers.

"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," FedEx Ground Senior Vice President and General Counsel Cary Blancett said.

FedEx Ground, Judge William A. Fletcher wrote in the decision, contracts with drivers who must wear FedEx uniforms, drive FedEx-approved vehicles and groom themselves according to FedEx's appearance standards to deliver packages to its customers. "FedEx tells its drivers what packages to deliver, on what days and at what times," he said. "Although drivers may operate multiple delivery routes and hire third parties to help perform their work, they may do so only with FedEx's consent."

"Nationally, thousands of FedEx Ground drivers must pay for the privilege of working for FedEx 55 hours a week, 52 weeks a year," Beth Ross, one of the lawyers for the drivers, said.

While United Parcel Service Inc.'s (UPS) workers are unionized, FedEx Ground has skirted the higher labor costs associated with a unionized workforce by using independent contractors to deliver packages. FedEx has since changed its business model from directly employing these independent contractors as drivers to contracting out deliveries to independent companies that employ drivers.

The case stems from three class action lawsuits originally filed in California involving about 2,300 full-time delivery drivers for FedEx in that state between 2000 and 2007 and in Oregon involving 363 individuals who were full-time delivery drivers between 1999 and 2009.

About 40 similar cases were filed against FedEx between 2003 and 2009 in approximately forty states, according to court documents. The cases were consolidated in so-called multidistrict litigation, and class certification was granted in 28 cases, according to FedEx's Form 10-K filed in July with the Securities and Exchange Commission.

"We remain committed to maintaining a business model that has been proven successful for our customers, service providers, and shareowners," Sean O'Connor, FedEx Ground vice president of contractor relations, said.

--Laura Stevens contributed to this story.

Write to Maria Armental at [e-mail]

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