FedEx Ground Suffers a Setback in Illinois: Court Finds FedEx Misclassified Its Illinois Drivers as Independent Contractors

The first decision on the merits has been issued in the FedEx Ground class action “independent contractor” cases.  Over sixty cases that have been brought against Fed Ex Ground under state laws and a nationwide ERISA class action have been consolidated in federal court in Indiana.  On May 28, 2010, Judge Robert L. Miller, Jr., the judge assigned to hear and decide all of these Fed Ex Ground cases, granted summary judgment in favor of the Illinois plaintiffs on their wage claims under the Illinois Wage Act.  FedEx Decision Illinois State Claims 5.28.10 (N.D. Ind.)

The Illinois Wage Act defines an “employee” broadly as “any individual permitted to work by an employer in an occupation,” but excludes a worker, as noted by the court, who (A) is free from control and direction (under contract as well as in practice) by the hiring party over the performance of the work; (B) performs work either outside the employer’s ordinary course of business or outside the employer’s places of business; and (C) is an independently established business.  The court noted that “[e]ach element of the exemption must be present for the service provider to be an independent contractor.”

This type of “ABC” independent contractor law is one of the most stringent state laws in the nation.  As a result, workers in Illinois who qualify as independent contractors under the common law – which is used when applying the federal tax laws, many of the federal labor laws, and most state labor and employment laws – do not qualify as independent contractors under the state wage law.  This is an example of “IC-minus” legislation.

In reaching his decision, the judge focused upon the second factor: whether the drivers perform work outside of the employer’s ordinary course of business or outside of the employer’s places of business.

The court found that the drivers’ work was performed within the usual course of FedEx’s business, focusing on the facts that FedEx required each driver “to conduct his/her business so that it [could] be identified as being a part of the [FedEx] system”; the services performed “were necessary to its business of picking up and delivering packages”; and that the FedEx V.P. of Contractor Relations testified that its drivers “are a cornerstone of FedEx’s business.”  The court also noted that all FedEx Ground drivers are required to wear uniforms and drive trucks with FedEx’s logo on them.

As to whether the drivers’ work was performed at FedEx’s place of business, the court found that this factor was satisfied because the drivers (or someone on their behalf) were required to pick up packages at the FedEx terminal before making deliveries each day.

The decision by Judge Miller is limited to the statutory claims under a single state’s wage law.  He expressly noted in his decision that he was not deciding the common law claims brought by the Illinois plaintiffs.  Nonetheless, this decision by Judge Miller is a partial setback for FedEx, which has experienced mixed results in the courts to date.

Written by Richard Reibstein.

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