3 State AGs threaten to sue FedEx for classifying workers as contractors instead of employees

By Samantha Bomkamp, AP
Tuesday, October 20, 2009

3 State AGs threaten to sue FedEx over contractors

NEW YORK — The Attorneys General of New York, New Jersey and Montana said Tuesday that they plan to sue FedEx Ground, claiming the unit’s classification of workers as independent contractors rather than employees violates state labor laws.

New York Attorney General Andrew M. Cuomo, Montana Attorney General Steve Bullock and New Jersey Attorney General Anne Milgram sent a letter to FedEx Ground accusing the unit of “blatantly misclassifying its drivers” and denying “these individuals the employment rights they are guaranteed by law.” All three attorneys general are Democrats.

FedEx’s model has come under fire in a number of states as workers sued for the right to health benefits, union organization capabilities and other rights not afforded to them under their current classification as contractors.

About 30 states are investigating FedEx Ground to determine if the company is misclassifying FedEx drivers as independent contractors. More than 45 class-action lawsuits have been filed in state and federal courts against the company’s classification of drivers.

In September, FedEx Corp. said in a regulatory filing that the Internal Revenue Service slapped it with $14 million in penalties plus interest as part of an audit related to the ongoing battle. FedEx said it would contest the ruling.

The company has continued to defend the contractor model. It says drivers operate as small business owners, not direct employees, because they can own multiple routes and expand their businesses as they see fit.

Pittsburgh, Pa.-based FedEx Ground is a division of FedEx Corp., headquartered in Memphis, Tenn.

A representative with the New York Attorney General’s Office said the investigation had been ongoing for about a year and included subpoenas to FedEx as well as meetings with the company and officials in other states.

FedEx confirmed in a statement that it has been in talks about the issues, but said it isn’t straying from its position.

“While we intend to continue with these discussions, we will vigorously defend the right of FedEx Ground independent contractors to own and operate their businesses, should the AGs pursue litigation,” the statement said.

FedEx has about 13,000 workers classified as independent contractors.

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