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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Effective January 1, 2015, certain employers became subject to the employer mandate of the Patient Protection and Affordable Care Act, and thus subject to liability under the ACA Employer Shared Responsibility provisions.