FedUp with FedEx

Antoine Morris

For years, the FedEx Corporation has deliberately misclassified its FedEx Ground drivers as “independent contractors” in an effort to fatten its bottom line and circumvent federal anti-discrimination laws. But last week’s decision by a federal judge in Indiana to grant class-action status to thousands of FedEx drivers suing for owed wages and benefits may be the beginning of the end of this controversial practice. Currently, FedEx employs approximately 15,000 so-called independent contractors, but the number of litigants in the class action suit could swell to 20,000.

At issue in the case is whether or not the contractors should be considered FedEx employees, and entitled to all the protections and benefits associated with it. Misclassifying drivers as independent contractors allows FedEx to wiggle out of paying health insurance, pension benefits and complying with labor laws. This means the contractors do not have the right to unionize nor are they protected by federal employment laws. Contractors are in no-man’s land because they are neither their own bosses nor do they have the legal rights of FedEx employees. Predictably, during the past few years, drivers seeking to unionize, have met with fierce resistance by the FedEx Ground, including but not limited to the firing of pro-union workers.

True independent contractors are supposed to be the equivalent of small businesspersons, able to be their own bosses and to possess substantial control over their work practices. At present, however, “independent contractors” at FedEx Ground have their routes, manner of dress, number of packages delivered, and hours worked per week are all determined by management. Independent contractors are thus in no-man’s land because they are neither their own bosses nor do they have the legal rights of FedEx employees.

FedEx Ground’s attempt to keep its employees outside the bounds of civil rights laws is especially troubling because of the allegations of discrimination at other FedEx divisions, as evidenced by another as evidenced by another recent class action racial discrimination suit against the shipping giant's FedEx Express division. Unfortunately, FedEx Ground, by labeling its drivers “independent contractors” has tried to deny them even the right to sue under racial discrimination laws.

Numerous state and federal courts and federal agencies have sided with workers, agreeing that they are in fact employees, not contractors. In Estrada v. FedEx Ground, California drivers won a class action suit filed in 2005 for being misclassified by FedEx and were reimbursed for the expenses they absorbed as drivers. That same judge called the contractual agreement FedEx had with its drivers “a brilliantly drafted contract creating the constraints of an employment relationship with [the drivers] in the guise of an independent contractor model.”

Also in 2005, a regional office of the National Labor Relations Board in Philadelphia concluded nearly all of the “contractors are statutory employees.” In 2006, a regional office in Boston ruled that contractors were employees and could vote to form a union.

Misclassifying workers is not a new phenomenon nor is it unique to FedEx Ground. In 2000, Microsoft acknowledged its misclassification of workers and settled a lawsuit filed by thousands of temporary employees and agreed to pay $97 million to compensate its workers in wages and benefits.

Independent contractors also represent a growing portion of the labor market – which may represent an increase in misclassified independent contractors as well as genuine ones, as employees try to limit their legal obligations to workers. According to the Department of Labor in 2005, there were 10.3 million independent contractors (7.4 percent of total employment), and the proportion of the total employed who were independent contractors increased from 6.4 percent in February 2001.

Moreover, through a little-known tax-loophole employers can not only sidestep paying certain payroll taxes and workers compensation by misclassifying workers, but also can shift that burden to the workers themselves. Such creative accounting can cut employer costs by as much as 30 percent. This worsening trend has been accompanied by calculated attacks on worker protections.

American Rights at Work and the Leadership Conference on Civil Rights will release a report on Thursday, October 25, 2007 highlighting this alarming trend in the U.S. labor force featuring FedEx drivers across the country currently fighting for their rights to unionize. FedUp with FedEx: How FedEx Ground Tramples Workers’ Rights and Civil Rights can be found by clicking here tomorrow afternoon.

Update: To access the report click here.