Earthquake In The Independent Contractor Misclassification Field: Changed Landscape Following Serious Legal Blow To FedEx Ground By Federal Appellate Court

FedEx Ground has been at the epicenter of the crackdown on IC misclassification by government regulators, state legislators, and plaintiffs' class action lawyers since 2007, when a California appellate court found single-route FedEx Ground delivery drivers to have been misclassified as independent contractors (ICs) instead of employees.1 But in 20092 and 20103, FedEx Ground won significant court decisions involving the IC status of its Ground Division drivers, including a December 2010 decision by a federal district court judge presiding over dozens of IC misclassification cases in a "multi-district litigation." That decision, issued over 3-1/2 years ago, had granted summary judgment in favor of FedEx Ground in 42 IC misclassification lawsuits brought by drivers in 27 states, including California and Oregon.

On August 27, 2014, however, the IC misclassification landscape for FedEx Ground dramatically reverted to its 2007 state. Only two days ago, two decisions were issued by the United States Court of Appeals for the Ninth Circuit. That highly regarded federal appellate court reversed the December 2010 decision by the federal district court judge in the multi-district litigation where 42 cases were decided in FedEx Ground's favor.

The impact of these new Ninth Circuit decisions is likely to reinvigorate the crackdown against companies using an IC business model that is not structured, documented, or implemented in a manner that demonstrates compliance with state or federal IC laws. As noted below, those companies that have enhanced their IC compliance consistent with the thrust of the Ninth Circuit decisions and applicable state and federal laws will have a far lesser risk for IC misclassification liability than those companies that use ICs but knowingly or unwittingly fail to do so in a compliant manner.

The Game-Changing Decisions by the Ninth Circuit

The two Ninth Circuit decisions covered lawsuits filed by FedEx Ground drivers in California and Oregon under the laws of those states. Both of those cases had been decided in FedEx Ground's favor by the federal court judge in the multi-district litigation.

The California case, Alexander v. FedEx Ground Package System, Inc., No. 12-17458 and 12-17509, is a class action involving approximately 2,300 individuals who provided delivery services to FedEx Ground on a full-time basis in California between 2000 and 2007. Those drivers sought unpaid wages and reimbursement of unpaid driving expenses.

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