The United States District Court for the District of Massachusetts recently ruled that FedEx Ground Package System, Inc. had misclassified a group of former pick-up and delivery drivers as independent contractors instead of employees under the Massachusetts Wage Laws.
Under Massachusetts law, an individual is considered an
employee, rather than an independent contractor, unless the
putative employer proves all of the following: (1) the individual
is free from control and direction in connection with the
performance of his or her service, both under his or her contract
and in fact; (2) the service is performed outside the usual course
of the business of the employer; and (3) the individual is
customarily engaged in an independently established trade,
occupation, profession, or business of the same nature as that
involved in the service performed. On a motion for summary
judgment, the FedEx drivers challenged FedEx's ability to
establish the second and third requirements.
The court first considered, and rejected, FedEx's argument that
the Massachusetts Wage Laws were preempted by the Federal Aviation
Administration Authorization Act of 1994 (FAAAA). Relying on the
U.S. Supreme Court's recent decision in Dan's City Used
Cars, Inc. v. Pelkey, the court concluded that the Wage Laws
do not "concern a motor carrier's transportation of
property," but rather apply broadly to all employees of
business located in Massachusetts.
The court then examined the second requirement of the independent
contractor test, under which FedEx had to prove that the pick-up
and delivery of packages is outside the usual course of its
business. FedEx argued that it is not in the package-delivery
business, and that its real business is operating "a
sophisticated information and distribution network for the pickup
and delivery of small packages." The court rejected that
distinction, based in part on FedEx's own definitions of its
business – in its website, its promotional brochures, and its
regulatory filings – to include the pick-up and delivery of
packages. The court also concluded that the pick-up and delivery
drivers are essential to FedEx's business, since without their
services FedEx would cease to operate. As a result, the court
granted the plaintiffs' motion for summary judgment on their
misclassification claims. Because FedEx could not sustain its
burden of proof under the second requirement of the independent
contractor test, the court did not address the third
requirement.
This decision should remind employers of the importance of
carefully classifying workers as either independent contractors or
employees, under wage laws that vary from state to state. Employers
should also ensure the accuracy and consistency of their
promotional materials, which may be used against them in
litigation.
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