The delivery giant FedEx has recently agreed to a $227 million settlement for a class action lawsuit involving more than 2,000 past and present employees in California. The case stemmed from accusations that the company was misclassifying their workers as independent contractors and subsequently denying them certain pay and benefits. Once ratified by the court, this settlement will end a years-long dispute between FedEx and its employees who delivered packages on their behalf between 2000 and 2007.

Facts of the Case

The case involved a section of FedEx that is no longer in existence. Every day, the company delivers more than 10.5 million packages by land, air, and sea. Company officials for FedEx argued that the drivers that worked for a branch of the company called FedEx Ground Package Systems were independent contractors and unprotected by California labor laws. The trial court in California ruled in favor of FedEx, stating that the workers were not considered employees of FedEx, and as a result they were not entitled to overtime pay or other benefits.

The federal appeals court ruled that the workers for FedEx were employees and not contractors, therefore they were eligible for overtime and benefits. The court noted that evidence of this fact was that FedEx assigned the delivery areas, directed where packages went, and assessed the drivers’ workloads. In addition, the workers were required to wear the company’s uniform and drive vehicles that were approved by FedEx.

This decision was consistent with the labeling of UPS and the U.S. Postal Service workers in similar roles, classified also as employees. This overruled the lower court’s decision regarding the status of the employees. FedEx then appealed this ruling, but then suddenly agreed to settle the case last Friday. There are cases filed against FedEx regarding the status of their workers in around forty states that are nearly identical to the facts alleged in the California case.

Settlement Decision

One representative for the case said that “the $227 million settlement, one of the largest employment law settlements in recent memory, sends a powerful message to employers in California and elsewhere that the cost of independent contractor misclassification can be financially punishing, if not catastrophic, to a business.”

The money set aside in the settlement will be used to compensate the FedEx drivers affected for work-related expenses and unpaid overtime pay. These expenses include the uniforms that the workers had to pay and the standardized trucks that they were required to buy. This settlement serves as an important reminder to other business owners that the classification of workers as either independent contractors or employees has incredible importance and can drastically affect a company.

Contact our Labor Lawyers Now

At Garcia & Gurney, A Law Corporation our experienced labor attorneys understand how an issue like the one faced by FedEx has the potential to ruin a business. Call or contact the office today for a private consultation of your case. Our office has helped clients throughout Pleasanton, Alameda County, and the Tri-Valley area with their labor, employment, and other business needs.