FedEx Ground has settled a case with the Attorney General of Massachusetts for misclassifying its delivery drivers. FedEx Ground classifies its drivers as independent contractors, instead of employees, which results in substantial cost-savings to FedEx Ground because under such an arrangement its drivers bear FedEx Ground’s overhead costs, among other things.
In addition, independent contractor classification permits FedEx Ground to escape the payroll tax and insurance obligations that its competitors are required to shoulder.
In Massachusetts, individuals who are free from control and direction in performing their service, who perform their service outside the employer’s usual course of business, and who customarily perform their service independently, are considered to be true independent contractors and not employees.
In 2004, Gangemi Law Firm, PC filed an action in New York State against FedEx Ground on behalf of its current and former New York delivery drivers, seeking a determination that the drivers were really employees, and not independent contractors. See Louzau, et al. v. FedEx Ground Package System, Inc., Civil No. 3:05-cv-00538 (NY). The civil action alleges that drivers were subject to unlawful wage deductions and were required to make “payments by separate transaction”–in violation of New York State Labor Law Sections 193(1) and (2). The matter is currently pending in federal court before the Multi-District Litigation Panel in Indiana.