FedEx Contractors :: Ground & Home Delivery Drivers Lawsuit

MYTH: As independent “owner-operators,” contractors run their own “business” and manage the day to day operations of the “business.”

FACT: FedEx Ground and Home Delivery misclassify drivers as independent contractors in violation of the law. The Judge in the Estrada v. FedEx Ground case found that single route drivers at FedEx Ground were employees because FedEx Ground “purposefully created controls of an employment nature” and exercised “close to absolute actual control” over the drivers. The situation at Home Delivery is virtually identical to the Ground drivers. Drivers for both Ground and Home are not free to run their “business” as they see fit - FedEx tells them when, where and how many packages to deliver, when and where to pick-up packages and at what time, how to maintain their trucks, who they can hire to help drive, and even how to dress. These are just some of the restrictions that FedEx places on contractors virtually making it impossible for the contractors to run an independent business.

MYTH: Thousands of FedEx Ground owner operators are succeeding and growing their “businesses.”

FACT: While there are some contractors with multiple routes that make a profit, the majority of the contractors struggle to make ends meet. Every year, FedEx increases per package and per stop settlement payments but reduces the core zone settlement payment in essence making it impossible for drivers to make more money. In addition, FedEx mandates that drivers bear all expenses and buy their truck. The average operating expenses and benefits are approximately $15,000 to $30,000 annually. Drivers take home pay is significantly less than their gross earnings. Even FedEx’s recruiting materials show that the average contractor makes between $40,000-50,000 after expenses are deducted.

By shifting the cost of its business to the drivers and providing no benefits, FedEx Ground alone brings in $4.7 billion dollars out of a total FedEx Corporation revenue of $29.4 billion. In fiscal year 2005, FedEx Ground’s operating income grew by 16%.

MYTH: As an independent contractor, you can only be terminated for contract violations.

FACT: The contract is purposefully vague and the interpretation of the contract is soley in the hands of FedEx. FedEx has “almost absolute unilateral control over contract termination to the point of it being the same as termination at will” - where drivers can be fired for any reason or no reason at all.

MYTH: The lawsuits threaten the livelihood of independent business owners.

FACT: The lawsuits challenge FedEx’s unlawful business practices. If FedEx truly treated drivers as independent contractors, there would be no violation. But, FedEx shifts all of the costs of its business to the drivers yet maintaining absolute control over the services they provide. The lawsuits seek among other things to recover business expenses, illegal wage deductions, in some cases overtime pay, and damages based on state law from FedEx. It also seeks to stop FedEx from misclassifying drivers as independent contractors.

FedEx Express drivers who are classified as employees are better paid then the FedEx Ground and Home Delivery drivers. In addition, they are entitled to receive benefits under employment laws including workers compensation, unemployment insurance, and family medical leave.

MYTH: Only former contractors are involved in the lawsuits.

FACT: The lawsuits include both current and former drivers. The majority of drivers know that they are not treated as true “independent contractors” and are unhappy with how FedEx treats them.

MYTH: By joining the lawsuit, I will lose my right to be an independent contractor.

FACT: FedEx cannot continue to label drivers as independent contractors and in reality treat them as employees but deny them all the legal rights of being an employee. Only FedEx profits as a result of the misclassification. FedEx will have to change the way it does business so that you can be treated fairly and legally.

MYTH: I should have a choice in whether I want to be an independent contractor or employee.

FACT: The law in each state dictates whether you are an independent contractor or employee. While the legal standards vary by state, generally, courts determine if a person is an employee or an independent contractor by asking certain key questions. See FAQs.
The conduct of the parties, not the labels used, determines whether the person is an employee or independent contractor. If the company creates requirements that make you an employee under the law, then you are legally an employee and the company must treat you as an employee and provide you benefits.

MYTH: The Judge in Estrada allowed FedEx to continue its independent contractor business model if it made a few changes.

FACT: The Judge in Estrada declared that single route drivers in California are employees and are entitled to the protections of the California labor laws as long as FedEx continues to use the same or substantially the same practices that it currently operates under. The Judge also prohibited FedEx from misclassifying drivers as independent contractors under its current Operating Agreement and from violating laws that protect employees. FedEx has 180 days from October 7, 2005 to make changes to its business so as to comply with the Judge’s order. FedEx has vowed to appeal the order.

MYTH: The Judge granted very few of the reimbursements in Estrada.

FACT: In Estrada, the Judge ruled that the Plaintiffs and the class members were entitled to recover expenses including for fuel, oil, tires, repairs, routine maintenance, business taxes, truck cleaning, liability insurance, registration and licensing of truck, uniforms, Business Support Package, and escrow account. The Judge excluded some of the evidence that supported the expenses and Plaintiffs are planning to appeal this ruling. Plaintiffs recovered $5.3 million dollars in reimbursements in Estrada.

MYTH: The expense of renting or buying the truck is not recoverable in the lawsuits.

FACT: The Judge in Estrada said that the cost of renting or buying the truck was not a work related expense under a single law. The plaintiffs in Estrada will appeal this ruling, but this ruling does not bar other legal theories in California or elsewhere. In the MDL litigation, Plaintiffs have asserted other legal theories to recover for the lease or purchase of the truck.

MYTH: If I have more than one route, I am not part of the lawsuits.

FACT: Some of the MDL lawsuits are limited to drivers with only one route. However, multiple route drivers in the other MDL cases are not automatically excluded. It will depend on the facts of your situation and the law in your state. Some state decisions including in California have ruled that drivers with multiple routes are employees even though they have hired other drivers to drive for them.

MYTH: That drivers will have to pay taxes on attorneys fees FedEx has to pay Plaintiffs’ lawyers.

FACT: FedEx Ground has misrepresented the effect of the Estrada case yet again. FedEx Ground is circulating information saying that the attorney fees FedEx has been ordered to pay for the seven years of Plaintiffs' lawyers work on this case will be taxable to the drivers. Nothing could be further from the truth! In the fall of 2004, Congress passed a law to make sure that clients in employment cases were not required to pay taxes on any fees paid to their lawyers. Under that new law, for any judgment which occurred after October of 2004, no taxes are paid by the client. The final judgment in Estrada was issued in December of 2005 and the attorney fees were awarded in November, 2005; so, the Estrada fees fall under the new law.

The company also tells people how much the lawyers were awarded, but it fails to mention that it is FedEx Ground that is required to pay those fees, not the drivers. The drivers’ recovery will be entirely their own, without deduction for any attorney fees. While it emphasizes the large amount of fees the court awarded to the Plaintiffs’ lawyers, the company never mentions the millions it has paid for its high-priced lawyers over the course of the seven-year case, which was deliberately delayed at every turn by the company.

Do you wonder why FedEx would misrepresent these facts to all its current drivers and others? That's easy - - they want to try to convince drivers not to participate in these lawsuits and to refrain from exercising or enforcing their legal rights.