In a companion case stemming from the same multidistrict litigation, the Ninth Circuit also
reversed a multidistrict court’s grant of summary judgment to FedEx after applying the right-to control
test to statutory claims by 363 drivers in Oregon (Slayman v. FedEx Ground Package
System, Inc., 2014 BL 237667, 9th Cir., 12-35525, 8/27/14 ).
Those claims against FedEx Ground Package System Inc. allege illegal deductions, fraud and
rescission. Remanding to the district court with instructions to enter summary judgment for the
drivers on the issue of employment status, the Ninth Circuit said they also were employees under
the economic realities test, which governs their injunctive relief and unpaid overtime claims under
Section 653.261 of the Oregon Revised Statutes.
The court rejected FedEx Ground’s argument in both cases that the focus should be on the
whether the putative independent contractors have significant entrepreneurial opportunity for gain
or loss. Rather, California and Oregon cases indicate that entrepreneurial opportunities do not
necessarily undermine a finding of employee status, Judge William A. Fletcher wrote for the court.
Judges Alfred T. Goodwin and Stephen S. Trott joined in the opinions, and Trott filed a
concurrence in Alexander.
No Longer Business Model.
“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,” Cary Blancett, general
counsel for FedEx Ground, wrote in an Aug. 27 statement. FedEx Ground spokesman Patrick Fitzgerald told Bloomberg BNA Aug. 28 that the business
model that is the subject of the litigation is no longer in use. Fitzgerald said “since 2011, FedEx
Ground has only contracted with incorporated businesses that treat their workers as employees.”
One attorney representing drivers in Alexander, Aaron D. Kaufmann of Leonard Carder LLP in
California, told Bloomberg BNA Aug. 28 that the decision underscores how paramount the right-to-control
test is in determining employment status. Just because a company calls a work scenario
an independent contractor relationship in a contract doesn’t excuse it from complying with
applicable employment law, he said.
“FedEx Ground built its business on the backs of individuals it labeled as independent contractors,
promising them the entrepreneurial American Dream,” Beth A. Ross, another Leonard Carder
attorney representing the Alexander drivers, said in an Aug. 27 press release. “However, as Judge
Trott said in his concurring opinion, not all that glitters is gold.”
Litigation Spans 40 States.
Drivers in Alexander and Slayman claimed that FedEx Ground improperly classified them as
independent contractors under state law.
In characterizing its drivers as independent contractors, FedEx and the drivers entered into
operating agreements providing that “the manner and means” of achieving results is within the
driver’s discretion and stating that “no officer, agent or employee of FedEx … shall have the
authority to direct [the driver] as to the manner or means employed.”
In reality, however, the court found that FedEx directed the drivers to appear clean-shaven with
trimmed hair, assigned them service areas and work schedules, and required them to paint their
trucks a certain color of white and display FedEx logos.
“Between 2003 and 2009, similar cases were filed against FedEx in approximately forty states,”
the Ninth Circuit wrote. These multidistrict litigation proceedings were consolidated in the U.S.
District Court for the Northern District of Indiana, which ultimately granted class certification to the
Alexander and Slayman drivers on certain wage and hour claims under state laws .
“The MDL Court denied nearly all of the MDL plaintiffs’ motions for summary judgment and
granted nearly all of FedEx’s motions,” Fletcher wrote , , , . The MDL court decided that “plaintiffs were independent contractors as a matter of law in each
state where employment status is governed by common-law agency principles,” Fletcher added.
Right-to-Control Rules.
In reversing the MDL court, the Ninth Circuit found that instead of focusing on entrepreneurial
opportunity for profit or loss, the proper measure of determining employment status in California is
the right-to-control test as stated in S.G. Borello & Sons, Inc. v. Department of Industrial Relations,
48 Cal. 3d 341 (1989).
“Whether FedEx ever exercises its right of refusal is irrelevant; what matters is that the right exists,
” the Ninth Circuit wrote, citing Ayala v. Antelope Valley Newspapers, Inc., 59 Cal. 4th 522 (Cal.
2014) .
Under the multi-factor Borello test, the main evaluation “of an employment relationship is whether
the person to whom service is rendered has the right to control the manner and means of
accomplishing the result desired,” Fletcher wrote. He added that California courts also examine
“secondary” indicia of the work relationship, including the skill required and who provides the tools.
Regardless of the independent contractor label provided in the operating agreements between
FedEx Ground and its California drivers, the Ninth Circuit found the company exercised enough
control over the drivers to establish an employment relationship. Citing these “unambiguous”
operating agreements and FedEx’s actual practices, the court found that the company controlled
the drivers’ personal grooming, the paint color and logos on the drivers’ trucks, work times, driving
routes and the ability to hire helpers.
Although the court agreed “with FedEx that ‘results,’ reasonably understood, refers in this context
to timely and professional delivery of packages,” it decided that “no reasonable jury could find that
the ‘results’ sought by FedEx includes detailed specifications as to the delivery driver’s fashion
choices and grooming.”
Likewise, under Oregon’s four-pronged right-to-control test, courts must first weigh the most
important factor—“direct evidence of the right to, or exercise of, control”—before moving on to
considerations of who furnished equipment, payment methods and the right to fire, the Ninth
Circuit wrote.
In addition to Kaufmann and Ross, Elizabeth C. Morris of Leonard Carder, and Ellen Lake in Oakland, Calif., represented the Alexander drivers. Mark A. Friel, Steve D. Larson and Scott A.
Shorr of Stoll Berne in Portland, Ore., represented the Slayman drivers. O’Melveny & Myers LLP
attorneys Jonathan Hacker and Anton Metlitsky in Washington, Chris Hollinger in San Francisco,
Robert Schwartz, Carolyn Kubota, Robert Swerdlow and Scott Voelz in Los Angeles represented
FedEx Ground.
Reproduced with permission. Published 8/28/14. Copyright 2020 by The Bureau of National Affairs, Inc. (800-372-1033) <http://www.bloombergindustry.com>