Why it matters: In a blow to FedEx, the Ninth U.S. Circuit Court of Appeals reversed summary judgment in the company’s favor, finding that its workers were in fact employees and not independent contractors. The cases involved classes of workers in California and Oregon who alleged they were misclassified by the company and did not receive required wages or benefits. Applying the “right to control” test, the panel said FedEx’s control of the workers overshadowed any other factors. The delivery company already announced its intent to seek en banc review of the decision, which could prove extremely costly for FedEx.

Detailed Discussion

Are FedEx drivers employees or independent contractors? Drivers across the country filed suit against the delivery company, alleging that although FedEx characterized the workers as independent contractors, they were in fact employees missing out on wages for meal and rest periods, overtime pay, and compensation for equipment.

Cases from 40 states were consolidated in multidistrict litigation proceedings in Indiana federal court. A judge granted summary judgment to FedEx, ruling that the drivers were independent contractors. The plaintiffs in the Oregon (Slayman) and California (Alexander) cases appealed.

In a pair of decisions, a three-judge panel of the Ninth Circuit reversed summary judgment for FedEx and ordered the MDL court to enter summary judgment for the plaintiffs. The panel applied the “right to control” test in both the Slayman and Alexander decisions.

Each driver signed an Operating Agreement, which governed his or her relationship with FedEx. The agreement laid out various requirements for drivers, from a dress code and grooming policy to the size and layout of shelves in the back of a delivery truck. While drivers are not required to follow specific delivery routes, FedEx provides routes that will “reduce travel time” and allow drivers to meet the window customers are given for delivery.

Working hours are not dictated by FedEx, but managers structure a workload to ensure a window of 9.5 to 11 hours each day, and the agreement gives the company the power to “reconfigure” a driver’s service area to reach the proper hours. Training is provided by the company and managers are allowed to conduct four ride-along performance evaluations each year (and instructed to observe details like whether the driver “demonstrates a sense of urgency”).

FedEx managers may refuse to let drivers work if their vehicles or personal appearance do not meet the company requirements.

“FedEx can and does control the appearance of its drivers and their vehicles. FedEx controls its drivers’ clothing from their hats down to their shoes and socks,” while vehicles must be painted a specific shade of white and shelves installed at precise dimensions, the court wrote. “FedEx’s detailed appearance requirements clearly constitute control over its drivers.”

Further, “FedEx can and does control the times its drivers can work,” by structuring their workloads and giving the company the power to adjust schedules, as well as mandating that drivers cannot leave their terminals until all packages are loaded and vehicles must be left at terminals overnight to get packages loaded in the morning. “The combined effect of these requirements is substantially to define and constrain the hours that FedEx’s drivers can work,” the panel said.

The court acknowledged that FedEx does not control every detail of the drivers’ work, “[b]ut the right-to-control test does not require absolute control. FedEx’s lack of control over some parts of its drivers’ jobs does not counteract the extensive control it does have the right to exercise.”

As for FedEx’s contention that it only controlled results and not the manner in which the drivers achieved the necessary results, the panel disagreed. “[N]o reasonable jury could find that the ‘result’ sought by FedEx includes ‘every exquisite detail’ of the delivery driver’s fashion choices and grooming,” the court wrote. “And no reasonable jury could find that the ‘results’ FedEx seeks include having all of its vehicles containing shelves built to exactly the same specifications.”

Analysis of other factors under both states’ interpretation of the right to control test (as well as the economic realities test in Oregon) were subsumed by the “powerful evidence” of FedEx’s control over drivers, the court said, adding that neither state has adopted the new “entrepreneurial opportunities” test advanced by FedEx.

Reversing summary judgment for FedEx, the court remanded both cases to enter summary judgment for the drivers.

To read the opinion in Slayman v. FedEx, click here.

To read the opinion in Alexander v. FedEx, click here.