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FedEx 'Strays From Reality' in Driver Lawsuit, Loses Appeal

By Casey C. Sullivan, Esq. on July 16, 2015 | Last updated on March 21, 2019

Got bad precedent? Differentiate it. Did a question certified to a state court come out not in your favor? Try to spin it. But remember, there are limits to legal interpretation. If you're not careful, you might soon find yourself simply denying reality.

This is exactly what happened to FedEx, according to the Seventh Circuit. For nine years, FedEx had classified its drivers as independent contractors, not employees, leading to litigation throughout the country. When the Kansas Supreme Court ruled that the drivers were employees under state law, FedEx simply attempted to ignore that reality, much to the Seventh Circuit's chagrin.

Contractor or Employee? Look to State Law

Between 1998 and 2007, FedEx classified its drivers as independent contractors, forcing them to buy their own supplies and pay all of their employment taxes. At the same time, the company controlled even the smallest details of their job, including imposing specific guidelines for hygiene and body odor.

Drivers sued in Kansas, Florida, California, and elsewhere. Since employment is determined largely by state law, the Kansas drivers' litigation necessitated certifying questions to the Kansas Supreme Court. Under Kansas law, the court applies a simple 20 factor test to determine whether an employer-employee relationship exists. Applying that test, the Kansas Supreme Court said that, as a matter of law, the drivers were employees.

FedEx Cannot Simply Ignore the State Ruling

FedEx's interpretation of that decision "strays from reality," according to the per curium decision. FedEx claimed that the state court's decision rested on whether FedEx exercised "actual control" over the drivers. The Seventh Circuit decided to read the Kansas court's actual decision, which said no such thing. "Actual control" is not even one of the many, many factors the Kansas courts examine.

When FedEx's creative interpretation of the Kansas Supreme Court decision was unavailing, the delivery company simply said the Seventh should ignore it. The decision drew "adverse inferences" from the record, FedEx claimed. Except that the record did not matter -- certification deals with purely legal, not factual questions. The state answers are binding, the Seventh Circuit reminded FedEx, and like reality, inescapable.

FedEx, for its part, isn't ready to accept the new reality just yet. As courts have continued to rule against it, the company has stopped employing many drivers directly, instead contracting out driving to third party businesses whose drivers are -- you guessed it -- independent contractors.

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