Big Win for Kansas FedEx Drivers on Designation

(CN) - FedEx misclassified hundreds of drivers as independent contractors, the Kansas Supreme Court ruled, echoing a recent finding for California and Oregon workers.

Aside from the far-reaching effects that the ruling could have on businesses that use independent contractors, there are dozens of pending cases against FedEx in the 7th Circuit that this decision shapes.

FedEx has faced multiple class actions across the country by both current and former drivers who signed contracts with FedEx between 1998 and 2007. Drivers say that the shipping giant classified them as independent contractors, but forced them to buy their own uniforms and equipment, while also controlling minute details of their appearance and behavior, with specific guidelines for hygiene and body odor.

In defending its classification, FedEx pointed out that drivers are allowed to set their own routes on deliveries.

The Judicial Panel on Multidistrict Litigation consolidated more than 70 class actions in 2005 and transferred the matter to the U.S. District Court in South Bend, Ind.

Craig v. FedEx, a 479-member class seeking relief under ERISA and the Kansas Wage Payment Act, was designated the lead case.

Class members sought damages for all costs and expenses they incurred during their employment, along with overtime wages they were denied as a result of being improperly classified as independent contractors.

U.S. District Judge Robert Miller ruled for FedEx and remanded the cases for separate proceedings.

In 2011 the 7th Circuit affirmed the remand order, but in 2012 the federal appeals court declined to intervene on the merits of the lead case, saying the ruling turns on application of Kansas law.

It certified certain questions to the Sunflower State's high court, and those justices unanimously found Friday that FedEx misclassified employee drivers in Kansas as independent contractors.

"FedEx has established an employment relationship with its delivery drivers but dressed that relationship in independent contractor clothing," the unsigned opinion states.

Citing stipulations of the Kansas Wage Payment Act, the court noted that "FedEx's control and micromanaging undermine the benefit that a driver should be able to reap from that arrangement." The court also reiterated that a driver's status as an employee is unchanged whether he covers one or more service areas.

Important for the court was the fact that FedEx "carefully structured its drivers' operating agreements so that it could label the drivers as independent contractors in order to gain a competitive advantage," the justices said.

The added that "this is a close case by design, not happenstance," noting that FedEx's "competitive advantage" came in part at the expense of its drivers.

Federal regulations do not define the term independent contractor, thus leaving it to the court to decide if "the worker is economically dependent on the business to which he or she renders service or whether the worker, as a matter of economic fact, is in business for himself or herself."

Here, FedEx drivers lacked independence to alter an operating agreement that "more closely resembles a unilaterally proffered, take-it-or-leave-it employment contract," the ruling states.

The justices also emphasized that FedEx provides "manuals, handbooks, memoranda, training videos, and other means of communication that direct that manner and means of delivering packages."

"In short, the plaintiff drivers are integrated into FedEx's business to the highest degree possible," the 49-page ruling states.

The court noted that its ruling does not take into account the 9th Circuit's recent award of similar relief to FedEx drivers in Oregon and California.

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