A federal appeals court has held that nearly 2,700 FedEx driver plaintiffs in California and Oregon are employees, and not independent contractors as FedEx has classified them.
In the California and Oregon cases, the plaintiff drivers claimed that for a decade, FedEx required them to purchase company-approved trucks, uniforms, and other equipment as if they were independent contractors.
The three-judge appellate panel used the “right to control” test to determine whether the FedEx drivers were employees or independent contractors. The right to control test weighs a number of factors to determine employee classification. For example, the facts that FedEx drivers have to wear FedEx uniforms, drive FedEx-approved vehicles, and groom themselves according to FedEx’s appearance standards weighed toward the fact that the drivers were employees. Because FedEx tells its drivers what packages to deliver on what days, and at what times, this also makes the drivers employees and not independent contractors.
The court said that the fact that FedEx called the drivers independent contractors in an operating agreement did not change their actual status as employees.
Companies often try to save money by retaining independent contractors instead of employees to perform work. The reason they do this is because companies do not have to pay independent contractors overtime pay and other benefits such as social security. This case goes to show that if companies misclassify employees as independent contractors, they can end up paying the original employee costs they avoided and additional substantial penalties.
FedEx will appeal the ruling, but if it is upheld, the company could face millions of dollars in damages for overtime pay, back pay for missed meal and rest periods, and compensation for worker-provided equipment.