CHICAGO (Reuters) – A U.S. court on Monday July 27, 2009, (Paul Babineau v. Federal Express Corporation) rejected an appeal filed by FedEx Corp employees who were seeking federal class-action status in a wage-and-hour dispute with the package delivery company. A three-judge panel of the Atlanta-based 11th Circuit Court of Appeals upheld a lower court’s ruling that blocked the hourly employees in Florida from forming a class.
On the other hand
A federal judge in Indiana, the same day, granted FedEx Ground drivers in eight states class action status in their suit against FedEx Corp. that claims the company incorrectly classified them as independent contractors. States where class action status was granted include Arizona, Georgia, Louisiana, Nevada, North Carolina, Ohio, Oregon and Utah.
FedEx legal battles over worker classification have been an issue for years.
FedEx’s faces similar class action lawsuits from drivers in at least 20 states. Most of these actions are a result of the company’s classification of its drivers as independent contractors. For example:
LOS ANGELES – Reuters News Service reported, “…Fedex Corp…said on Friday that the U.S. Internal Revenue Service found that its FedEx Ground independent contractors should be reclassified as employees for tax purposes and that the company faced related taxes and penalties of more than $319 million for 2002…The IRS is auditing similar issues for 2004 through 2006, the package delivery company said in the filing with the U.S. Securities and Exchange Commission.”
The potential IRS liability may rise to $1 billion if the review results in an adverse ruling, according to several different sources.
Others have also joined in. For example Massachusetts Attorney General Martha Coakley fined FedEx $190,000 for what she called intentionally misclassifying 13 drivers as contractors.
According to a lawsuit website (www.fedexdriverslawsuit.com):
- South Bend, Indiana (October 15, 2007) – Judge Robert Miller of U.S. District Court for Northern Indiana, granted class certification on behalf of approximately 14,000 current FedEx Ground/Home Delivery drivers – as well as upwards of 10,000 former drivers – across the nation who are challenging FedEx’s independent contractor model.
- The California Supreme Court (Estrada vs FedEx Ground) upheld a trial court decision that single-route contractors in the state were full-time workers.
- The company paid $27 million to settle the Estrada case to “put the matter behind us.”
- FedEx’s labor practices have been under attack by litigation in 30 states from Alabama to Wisconsin.
- The State of California, EDD prevailed in a tax ruling dated November 2006, from an employment tax audit assessing for approximately $8 million from misclassifying drivers in California.
In addition other websites have sprung up all around attacking FedEx’s classification practices, such as www.fedexaminer.com and www.fedexwatch.com. There are also various websites sponsored by unions, such as the Teamsters, who are attempting to organize the drivers.
Just winning or losing isn’t the real issue.
In my opinion, in addition to the legal costs, the fines, and the settlements paid, the real issue is the cost of management’s distraction from focusing on running the world’s largest carrier service because they are engaged in continuous legal battles over worker classification issues.
It’s not just FedEx. There is a reported rise in labor class action suits across the country.
According to a recent survey 79% of companies surveyed experienced new litigation last year. The study showed in the last few years there has been a 36% increases in wage-and-hour, multi-plaintiff cases in California, and that 26% of U.S. firms experienced new lawsuits with claims above $20 million.