FedEx Ground settles California owner-operator classification lawsuit

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FedEx Ground has agreed to a $26.8 million court settlement with 203 California drivers who argued they were misclassified by the company as independent contractors. Final court approval of the judgment is required. The decision was announced Friday, Dec. 5.

The case of Estrada vs. FedEx Ground Package System Inc. went to trial before California Superior Court Judge Howard Schwab (ret.) in 2004. He ruled that the drivers were legally employees and entitled to be reimbursed for all the expenses they were required to pay by the company. In August 2007, the California Court of Appeals affirmed the judgment that the drivers were employees and doubled the damages awarded to the drivers.

“The resolution of this single-work-area case has no bearing on our relationship with our network of independent contractors in California or any other legal case,” the Memphis, Tenn.-based delivery company said in a statement.

About 27,000 FedEx drivers nationwide have a multidistrict lawsuit against the company for misclassification pending in South Bend, Ind. As in the California Estrada case, the drivers are asking the court to find that FedEx treats them like employees and rule that they are entitled to the same legal rights of employees.

Lynn Rossman Faris of Leonard Carder, of Oakland, Calif., lead counsel for the California drivers and co-lead in the nationwide class action, hailed Friday’s settlement. “FedEx has claimed for several years that it would eventually win on appeal,” Faris said. “That fantasy is finally over.”

The Internal Revenue Service in October withdrew its tentative assessment of tax and penalties for the 2002 calendar year — $319 million plus interest — against FedEx Ground relating to the classification of FedEx Ground’s owner-operators for federal employment tax purposes. FedEx said the IRS is continuing its employment tax audit of FedEx Ground for the 2002 calendar year.