Monthly Archives: August 2014

NINTH CIRCUIT UNDERCUTS FEDEX’S INDEPENDENT CONTRACTORS

On August 27, 2014, a panel of the Ninth Circuit Court of Appeals unanimously held in Alexander v. FedEx (9th Cir. Case Nos. 12-17458 and 12-17509) that FedEx drivers are employees and not independent contractors under the California Labor Code.  The plaintiff class is comprised of about 2,300 drivers that drove for FedEx Ground or FedEx Home Delivery between 2000 and 2007.  Each was party to an Operating Agreement with FedEx.  The Court closely examined the Operating Agreement going beyond its labels and pronouncements and beyond the intentions of the parties.  The Court determined that, in actual application, the Operating Agreement together with FedEx’s other policies and procedures, unquestionably made the drivers employees.  Indeed, in considering the factors of the right-to-control test, the manner and means question weighed so strongly in favor of an employee status that the Court scarcely considered the secondary factor which, in any case, favored neither side according to the Court.  The Court found the following points most significant: (1) the control exercised by FedEx over the appearance of the drivers and their vehicles; (2) the control over the times drivers may work; and (3) the control over aspects of how and when drivers deliver their packages, rejecting the significance of the few areas where there was some driver discretion.  The Court also rejected the argument advanced by FedEx that its drivers’ ability to take on multiple routes and vehicles and use third-party helpers was inconsistent with an employee status given that FedEx must consent to such entrepreneurship.

One important lesson of this case is that one should expect that courts will go beyond the mere language of an operating agreement and look to its actual, practical effect such that artful wording will not necessarily win the day.  The day-to-day activities of the motor carrier, and how it interacts with the independent contractors will be analyzed separately from the language in the agreement and will carry more weight than the language of the agreement.

FedEx has stated its intention to request and end banc hearing from the Ninth Circuit (meaning a hearing before the entire Court) and it is anticipated that FedEx will ultimately seek review from the U.S. Supreme Court, if necessary.  However, the case is currently good law, and will affect the decisions of the lower courts.