FedEx Ground Package System Inc. has agreed to settle a Fair Labor Standards Act (FLSA) class action affecting more than 2,000 misclassified FedEx Ground and FedEx Home Delivery pickup and delivery drivers in California. According to Forbes, FedEx will be resolving the claims made, some dating all the way back to 2000, by means of a $228 million fund.
The FedEx settlement came to fruition following a 2014 Ninth Circuit ruling that the company was actively misclassifying its drivers as “independent contractors” in order to avoid granting its employees fair compensation and benefits. The FedEx drivers responsible for bringing the complaint to the attention of the California state court in 2004 claimed the delivery company required its drivers to enter into agreements stating they would be labeled as independent contractors.
The agreement allowed FedEx to direct the costs of FedEx branded trucks, FedEx branded uniforms, FedEx scanners, fuel, maintenance, insurance, etc. to its drivers. FedEx drivers were also not fairly compensated for any missed meals, overtime, rest periods and so on. Despite all of this, FedEx still maintained the right to control the drivers’ work hours, routes, appearance and equipment.
The Ninth Circuit believed FedEx’s operating agreements allowed the company “a broad right to control the manner in which its drivers’ perform their work. The most important factor of the right-to-control test thus strongly favors employee status.”
Beth Ross of Leonard Carder LLP, who represented the FedEx FLSA class action, believes this litigation has shown companies like FedEx the consequences of refusing your employees their FLSA rights:
“The $228 million settlement, one of the largest employment law settlements in recent memory, sends a powerful message to employers in California and elsewhere that the cost of Independent Contractor misclassification can be financially punishing, if not catastrophic, to a business,” Ross said.
Although the settlement puts an end to California’s FedEx FLSA class action, the national status of FedEx drivers in the same situation remains unknown. While misclassification lawsuits have been filed by drivers in different states, challenging a company as massive as FedEx is no easy task. Other companies, especially those in the trucking and delivery industries, are also notorious for relying on misclassification to dodge the costs of wages and benefits. Future debates on how to improve the FLSA’s standing will be what determines the lives of these misclassified employees.