FedEx to Appeal Mass. Penalty over Classification of Drivers

December 20, 2007

Massachusetts Attorney General Martha Coakley has assessed penalties of more than $190,000 against FedEx Ground Package System, Inc. for what her office claims is an intentional misclassification of 13 drivers as independent contractors rather than as employees.

The attorney general’s office cited FedEx Ground for violating the state’s independent contractor law by misclassifying the drivers, failing to provide a proper paystub, failing to provide workers’ compensation, not paying overtime to certain drivers, and neglecting to deduct and withhold state income taxes.

In addition to the penalties, the citations require FedEx Ground to rectify the violations and provide restitution to the 13 drivers.

Maury Lane, FedEx spokesperson, said his firm would appeal the penalty and the determination that it misclassified the workers.

He said Fedex has been cooperating with Massachusetts officials over the classification of drivers for several years and there has been no complaint about what is was doing.

“We were surprised,” he said of the ruling and penalty. “We believe it is wrong.”

He also suggested that the ruling could have a “chilling effect” on other industries that hire independent contractors, whom he described as “the backbone of today’s economy.”

The Massachusetts independent contractor law provides that an individual performing any service is an employee unless the individual is free from control and direction of the employer; the service is performed is outside the usual course of the business of the employer; and the individual customarily works as an independent contractor.

Coakley said her office began its FedEx Ground investigation during the summer of 2007 after receiving a driver’s complaint. Investigators concluded that FedEx Ground intentionally violated all three prongs of the Independent Contractor Law by directing and controlling the activities of drivers and restricting the drivers’ ability to deliver for any other entity. In addition, the investigation found that the drivers are performing the core business of FedEx Ground.

At least 400 drivers work for FedEx Ground throughout the state and FedEx Ground has terminals in Billerica, Northboro, Wilmington, West Bridgewater, and on Martha’s Vineyard.

The attorney general said the investigation into FedEx Ground is ongoing.

FedEx Ground has 10 days to appeal the citations. An appeal would be heard before the Division of Administrative Law Appeals, an administrative agency within the Commonwealth of Massachusetts’ Executive Office of Administration and Finance.

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