The parcel carrier has agreed to pay $240 million to settle lawsuits covering around 13,000 divers across 20 states who claimed they should have been treated as employees instead of independent contractors.
FedEx Corp. has agreed to pay $240 million to settle driver misclassification lawsuits in 20 states, the company said Thursday.
The suits, which cover around 12,000 divers with the FedEX Ground division, alleged the parcel carrier should have treated them as employees, rather than independent contractors.
The battle over driver classification, or misclassification as the plaintiffs see it, has been growing for years in the trucking industry, which until recently operated under an independent contractor model. Truck drivers have long claimed that as employees, they were owed back pay for overtime, reimbursement for work-related expenses, and other benefits.
FedEx, for example, until 2011 had always contracted directly with independent operators, which allowed the company to save money on wages, taxes, health care costs and pensions. The advent of the so-called in demand economy, which includes ride sharing services like Uber and Lyft, has only accelerated the push toward employee classification.
FedEx settled a similar driver misclassification suit in California last June for $228 million.
Then in July, the U.S. Department of Labor issued guidance to employers in determining a workers classification status that primarily revolved around to what extent the company exerts control over a worker’s daily activity and freedom to make decisions.
At question in all of these cases, is whether drivers are truly independent contractors or, as they argue, full-time employees who are by definition entitled to certain requisite wages and benefits.
The current settlement, which is still subject to approval from a federal court, could bring an end to a fight that has gone on for far too long, according to FedEx.
“We are pleased to put this matter behind us as it relates to a contract that has not been in use for a number of years,” the company said in its statement.
“If the litigation were to continue…a final resolution would be several years away, and would require significant time and expense to resolve the complex liability and damages issues presented,” the drivers said in court filings on Wednesday.
The case is In re FedEx Ground Package System Inc Employment Practices Litigation, U.S. District Court for the Northern District of Indiana, No. 3:05-MD-00527.
FedEx settles driver misclassification suit for $240m
