Lawsuits Bring Changes to FedEx Ground

By Leonard, Kim | Tribune-Review/Pittsburgh Tribune-Review, July 29, 2012 | Go to article overview
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Lawsuits Bring Changes to FedEx Ground

Leonard, Kim, Tribune-Review/Pittsburgh Tribune-Review

John Dionise answered an ad for a holiday delivery driver seven years ago, thinking it could lead to a corporate job with FedEx Ground.

He's still with FexEx Ground. But instead of drawing a paycheck, he has a business that employs 25 drivers, owns a fleet of trucks and delivers packages to residences along routes that stretch from Butler to Bethel Park.

"The potential for growth, to me, seemed to be a lot more attractive," he said. "The ability to do my own thing, run my own thing was more attractive than starting out in a cubicle."

Dionise is an example of how FedEx Ground's independent contractor system has changed in the seven years since contractors in 24 states started filing lawsuits, claiming they should be classified as employees -- with better pay and benefits and the ability to unionize -- because the company controls most aspects of their work.

Instead of driving one route, Dionise spends much of his day making sure deliveries are on time to a dozen service areas, trucks are serviced and schedules are adjusted for the ebb and flow of packages through the FedEx Ground Home Delivery center in Aleppo, where volume rose 10 percent in the past two years.

Robinson-based FedEx Ground said its contractor system is a key part of its business model that helped it keep costs low and carve out a 28 percent share of the ground package delivery market in the United States. Courts mostly sided with the company over time, spokesman Patrick Fitzgerald said, but a definitive answer isn't likely to come soon.

The U.S. Court of Appeals for the 7th Circuit, for example, is considering a challenge to a December lower-court ruling that sided with FedEx Ground. On July 12, the appeals court ordered the Kansas Supreme Court to provide an interpretation of that state's law on what constitutes an employee, versus a contractor.

"This case will have far-reaching effects on how FedEx runs its business, not only in Kansas but also throughout the United States," the court said of the class-action lawsuit with 479 plaintiffs. "And it seems likely that employers in other industries may have similar arrangements with workers."

Twenty-one similar cases are on appeal, the decision notes. Independent contractors are becoming more common -- employers have economic incentives to use them -- but there is "potential for abuse in misclassifying employees as independent contractors," the court said.

Matthew M. Houston, a New York attorney representing plaintiffs in the Kansas lawsuit, declined to comment, saying the case remains an open appeal.

Fedex Ground hasn't waited for the courts to produce a final answer. In the seven years since the first lawsuit raised the issue of contractor or employee, the company's methods have changed - prompted by the lawsuits and its growth. Today, many more of its contractors operate multiple delivery routes, and fewer are single- route drivers.

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