Workers Reclassified as Employees After Appeals Court Decision in FedEx Cases
Sept. 4, 2014
Two decisions from the 9th U.S. Circuit Court of Appeals held that delivery drivers hired by FedEx are employees under state law and not independent contractors. The two cases covered class-action lawsuits filed by FedEx drivers in California (Alexander v. FedEx) and Oregon (Slayman v. FedEx). The drivers were seeking to recover overtime, workers’ compensation, federal unemployment insurance, and similar benefits that are required to be provided to employees under federal and state law.
The drivers argued that the level of control established by FedEx over its workers indicated an employment arrangement under state law. In support of their argument, the drivers pointed to agreements under which FedEx dictated, among other items, the uniform to be worn during employment, the appearance of the drivers (“clean shaven, hair neat and trimmed, [and] free of body odor”), the color of the truck to be used, the dimensions and construction of the truck used, expected workload, and the specific time during which packages must be delivered. FedEx countered these arguments by claiming it did not exercise the level of control required for an employment agreement. In support of its argument, FedEx highlighted policies such as allowing workers to hire assistants to complete their routes, allowing the sale of routes without permission, requiring drivers to purchase and paint their own truck, and not requiring workers to follow manager recommendations provided after ride-alongs. The Court of Appeals found in favor of the drivers in both cases.
The Alexander and Slayman decisions muddy the waters in the already contentious area of worker classification and run counter to a 2009 decision in the U.S. Court of Appeals for the District of Columbia Circuit (FedEx Home Delivery v. National Labor Relations Board). It should be noted that these decisions are based on state law and therefore apply only to worker agreements in California and Oregon. As such, it is not clear what, if any, impact these decisions have on federal employment laws and payroll taxes, which define employees differently.
How workers are classified will become even more significant in 2015 with the implementation of the Affordable Care Act’s employer mandate.
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