Case Summary:

Drivers for FedEx Ground and Home Delivery brought a class action case claiming that they had been improperly classified as independent contractors while employed in California from 2000 to 2007. They asserted that FedEx had the right to control almost all of the details of their work and exercised this right by dictating everything from where, when and how drivers worked to their grooming and appearance of their uniforms.

Following a ruling from the Ninth Circuit Court of Appeals late last year, finding that the FedEx independent contractor scheme was illegal and that the driver were employees under California overtime law – not independent contractors, it was recently announced that FedEx agreed to pay $228 million to settle the case. This is one of the most significant wage and hour settlements in the last 10 years and a very important development in the ongoing battle against widespread misclassification of employees as independent contractors in order to avoid paying benefits, taxes, insurance and overtime pay on behalf of workers. Additionally, such improper pay schemes allow companies to gain an unfair and unlawful advantage over competitors whose pay practices properly classify and compensate workers as employees versus independent contractors.

California labor law utilizes a right-to-control test in order to analyze whether a worker is a true independent contractor or an employee, with the primary test being “…whether the person to whom service is rendered has the right to control the manner and means of accomplishing the result desired.” Courts in California also consider several additional factors including:

• The right to terminate “at will” and without cause;
• Whether the worker is engaged in a distinct occupation or business;
• The type of work performed and whether it is typically done under the direction of an employer or by a specialist without supervision;
• The skill required to perform the job;
• Which party supplies the tools, materials and place of work;
• The length of time for which the services are to be performed;
• The manner in which payment is made – by the job or by the amount of time required;
• Whether the work performed is a part of the regular business of the company; and
• Do the parties believe they are entering into an employer-employee relationship, although the label attached to the relationship by the parties is not definitive? What matters is what the contract, in actual effect, allows or requires.