Right now, millions of Christmas presents are zooming around the country in the back of FedEx (FDX) trucks -- driven, one might think, by FedEx employees. However, it turns out the employment status of those drivers depends on which state they are working in, and according to a judicial ruling issued Tuesday, most of them are independent contractors.
In a consolidated class action challenging FedEx Ground's contractor business model, U.S. District Court Judge Robert Miller Jr. found that most of those drivers are contractors, not employees, meaning they're responsible for their own expenses and benefits. It also means they lose access to important worker protections. However, the laws of a handful of states do classify the drivers as employees.
Back in May, Judge Miller found Illinois law dictates that drivers there be classified as employees. But in August, he ruled Kansas drivers are contractors. Tuesday's decision resolved most of the remaining cases with findings that FedEx Ground drivers were employees in only three other states: Kentucky, Nevada and New Hampshire.
Only Employees Can Unionize
In analyzing the workers' status, Miller focused on how much control FedEx had over the drivers. The judge considered several factors: FedEx can't fire the drivers at will, as it typically could with employees; drivers have the autonomy to hire helpers and sell their routes; and the drivers have to purchase and maintain their own trucks. Overall, the judge gave FedEx wins in 20 of the 28 class-action cases. The remaining eight will continue toward trial.
One big issue lurking inside these cases is unionization. Employees have unionization rights that independent contractors lack. Drivers for FedEx's main rival, UPS, are represented by the Teamsters Union, and the nonunion status of FedEx's drivers gives it a big cost advantage over UPS (UPS).
Even in those states where the drivers were ruled to be employees, unionizing is unlikely to be easy. Nevada is a "right to work" state, which makes unionization difficult, and union membership nationwide is at record lows. Given how stagnant wages have been, and how tough today's economy is, that low level of unionization is striking.
An Admittedly Limited Ruling
In the cases where the workers were ruled to be employees, or where they raised other legal issues not resolved on Tuesday, the possibility of a win -- much less a payday from any victory -- is a long way off. The cases are at a very early stage -- so early, in fact, that Miller began his opinion in a slightly tsk-tsk tone, noting that the evidence was so limited for his rulings that the rulings' effect had to be considered limited, too.
Specifically, he noted that if a FedEx Ground driver runs someone over, the company could still be liable on the basis that the driver is an employee -- even in the states where he'd held they weren't employees for the purposes of these suits. Similarly, drivers injured while working might also be able to claim employee status.
As a result, FedEx can't rely on Tuesday's order as a blanket protection against any future type of employee liability. Indeed, Judge Miller titled that introductory section of his opinion "Decisions Won't Preclude Most Future Litigation Concerning Employment Status of FedEx Ground Drivers." Even so, the Tuesday wins were "huge" for FedEx, according to at least one analyst following the company.