In a recent California case involving FedEx, the Ninth Circuit Court of Appeals reversed the lower court and held that approximately 2,300 FedEx drivers were employees despite Fedex’s attempts to categorize them as independent contractors. Alexander v. FedEx Ground Package System, Inc., No. 12-17458 (9th Cir. Aug. 27, 2014). This case should serve as a warning to freight brokers who assert too much control over their independent contractor drivers.
In California, similar to many jurisdictions, the “principal test” to determine the existence of an employment relationship is whether the alleged employer “has the right to control the manner and means of accomplishing the result desired.” S.G. Borello & Sons, Inc. v. Department of Industrial Relations, 729 P.2d 399 (Cal. 1989). Under this Borello “right-to-control” test, a judge will weigh and consider all the factors as a whole to determine whether an employment relationship is established. Arnold v. Mut. Of Omaha Ins. Co., 135 Cal. Rptr. 3d 213, 221 (Ct. App. 2011).
The following is a list derived from the case facts about the relationship between FedEx and its drivers:
- FedEx controlled both the appearance of the driver and the driver’s truck.
- Drivers were required to wear FedEx-approved uniforms;
- Although drivers supplied their own trucks, FedEx required the trucks to meet certain specifications;
- Trucks being used for FedEx delivery could not be used for any other purpose unless all identifying marks were covered; and
- Drivers were required to groom themselves according to FedEx standards.
- FedEx controlled the driver’s work and how the work was performed.
- FedEx dictated what packages each driver carried;
- FedEx dictated the time frame the drivers would deliver the packages;
- FedEx allowed drivers to hire third parties to assist with delivery, but any such party had to be approved by FedEx; and
- Each driver, although given complete control of his own hours and route, was assigned a workload to ensure a 9.5 to 11-hour day.
- FedEx required drivers to adhere to rigid performance standards.
- FedEx provided training to its drivers on job performance and customer interaction;
- FedEx managers could perform up to four “ride-along” evaluations each year after which the manager gave “feedback” on the drivers general performance, use of certain tools, and even the manner in which the driver carried his keys; and
- FedEx required drivers to comply with certain driving standards.
After applying the right-to-control test to the above facts, the Court found that FedEx Controlled (1) the appearance of its drivers and their vehicles; (2) the times its drivers can work; and (3) aspects of how and when drivers delivered their packages. Although FedEx argued that the Operating Agreement gave its “independent contractors” flexibility and that it only controlled the result of the work and not the details of how the result was achieved, the Court ruled that the plaintiffs were indeed employees as a matter of law under the Right-to-Control Test.
Take-Away
Although most freight brokers will not have the same brand image needs as FedEx, this case should serve as a warning to every company hiring independent contractors, especially freight brokers. If a broker wants to avoid liability by hiring independent contractors, then the broker should take extra care to make sure that those contractors hired are truly independent. When selecting a carrier, a broker should always run the proper safety checks to ensure that the carrier has a responsible hiring history. However, other than telling the carrier a time frame and a location, the broker should never attempt to dictate specific driver actions. Considering how often this topic changes and the possibility of massive liability, it’s better to be safe than sorry.