Court Cases/Decisions of Significance

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The U.S. Department of Labor recently scored a meaningful victory in yet another court case where a company failed to structure, document, and execute properly an independent contractor relationship with workers who were paid on a 1099 basis.  In Hilda L. Solis, Secretary of Labor v. Cascom, Inc. and Julia…

Last month, the federal district court judge assigned to handle dozens of state law class action claims brought around the country against FedEx Ground by its drivers, who have claimed they are “employees” misclassified as independent contractors (ICs), issued a comprehensive ruling covering 42 of the of the remaining lawsuits. …

Yesterday a federal court in Manhattan granted a motion for class action certification to a group of  adult dancers who have worked at the Penthouse Executive Club in New York City.  They alleged, among other things, that the Club violated the federal Fair Labor Standards Act (FLSA) by failing to…

Almost one year to the day following the joint statement by the Attorneys General of New York, New Jersey, and Montana that they intended to sue FedEx Ground for misclassifying drivers as independent contractors instead of employees, New York Attorney General Andrew Cuomo has commenced a lawsuit against FedEx Ground on behalf of the State of New York.  (New York State v. FedEx Ground Package System, Inc.)

The lawsuit was filed the same week as the Attorney General of the Montana, Steve Bullock, announced that his office settled its driver misclassification claims against FedEx Ground for $2.3 million.  The New York lawsuit also follows by two months the filing of a similar misclassification lawsuit by the Attorney General of Kentucky, Jack Conway, and comes three months after the Attorney General of Massachusetts, Martha Coakley, settled its driver misclassification claims against FedEx Ground for $3 million.

Cuomo’s lawsuit was filed in the New York Supreme Court for New York County. It alleges that, by classifying its drivers as independent contractors, FedEx’s Home Delivery unit fails to provide its drivers the rights afforded to “employees” under New York’s labor laws, which includes the Unemployment Insurance, Workers Compensation, Wage Payment, and Overtime laws.  According to the complaint filed in court, Cuomo alleges that “FedEx has the power to control, and does in fact control, almost all aspects of its drivers’ work” including “hours, job duties, routes, and even clothing.”  There are reportedly over 700 drivers in the Home Delivery unit.  (Click “More” for “Takeaway” below)

Last week, a federal district court judge assigned to an independent contractor misclassification case granted class certification to workers who were treated as independent contractors but allegedly were misclassified as employees.  In Norris-Wilson v Delta-T Group, Inc., the U.S. District Court for the Southern District of California, applying California’s common law test for independent contractor status, found that the plaintiffs’ claims for overtime compensation against a healthcare “referral agency for independent contractor services,” which the plaintiffs called a “temporary staffing agency,” met the requirements for class action certification.  (Click “More” for two “Takeaways” below)

The federal court judge assigned to over 60 cases involving FedEx Ground drivers who claim they have been misclassified as independent contractors instead of employees has issued his second key ruling in the case.  In contrast to the judge’s conclusion in May that FedEx Ground drivers in Illinois were employees and not independent contractors under that state’s restrictive wage payment laws, on August 11 the judge reached a contrary conclusion under Kansas wage payment law, which uses the more prevalent “common law” test.

The 103-page decision under Kansas law was issued by Judge Robert L. Miller, Jr., the federal district court judge located in the Northern District of Indiana who has responsibility for many of the class actions filed against FedEx Ground.  Judge Miller’s decision is significant for at least two reasons.

 
On July 15, 2010, the Massachusetts Attorney General’s Office announced that it had reached an agreement with FedEx Ground to settle a citation that the company was misclassifying its drivers as independent contractors (ICs) instead of properly classifying them as employees.  FedEx agreed to pay $3 million to settle the charges against it, including claims that it violated the Massachusetts Independent Contractor Law and improperly failed to pay the state payroll taxes and workers’ compensation and unemployment assistance premiums by treating its Ground Division drivers as ICs.  FedEx denied any liability in settling the case.

On the same day, FedEx Ground reportedly launched a new business model in Massachusetts for its ground and home delivery drivers. The new business model gives its single-route drivers three options for continuing to work with FedEx on a going-forward basis: (a) become a multi-route Independent Service Provider (ISP) by incorporating as a business, purchasing from FedEx Ground three or more work areas in the same geographic area and entering into an agreement with FedEx on an approved ISP arrangement for the work areas; (b) become an employee driver of an approved FedEx Ground ISP (that is, become a driver for a another driver that has set up a business as an ISP); or (c) terminate his or her relationship with FedEx Ground at the expiration of its current Operating Agreement, which will not be renewed, leading to loss of “employment” with FedEx Ground.

The first decision on the merits has been issued in the FedEx Ground class action “independent contractor” cases. . . . 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. . . . 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 Fed Ex, which has experienced mixed results in the courts to date.…