The Seventh Circuit Court of Appeals has ruled against FedEx in a case from 2003 involving 500 drivers in Kansas who claimed they were misclassified as contractors. The ruling that could have implications not only for 19 other class-action suits against FedEx but for services like Uber and others which use contracted drivers.
The appellate court upheld a 2014 decision from the Kansas Supreme Court which found that the FedEx drivers met a 20-point test for being considered employees under the Kansas Wage Payment Act (KWPA).
There will likely be a hefty price tag attached to the new ruling. Earlier this year, FedEx agreed to pay $228 million to cover retroactive costs, expenses and overtime wages to settle a case involving California drivers, after a similar 2014 decision by the Ninth Circuit Court of Appeals went against it. The company stopped using the contractor driver model in 2011.
“FedEx’ understanding of the Kansas Supreme Court’s decision strays from reality,” the three-judge Seventh Circuit panel said in its ruling. “The Kansas court restated the 20-factor test for determining employment status under the KWPA by eliminating ambiguous or duplicative descriptions; it did not enunciate a new test that requires further development of the factual record.”
“We fundamentally disagree with these rulings, which run counter to more than 100 state and federal findings – including the U.S. Court of Appeals for the D.C. Circuit – upholding our contractual relationships with thousands of independent businesses,” said FedEx Ground Senior Vice President and General Counsel Cary Blancett last August, after the Ninth Circuit ruling. “The operating agreement on which these rulings are based has been significantly strengthened in recent years, and we look forward to continuing to work with service providers across our network to provide customers the industry’s most reliable service.”