It’s often more cost effective for companies to hire independent contractors to perform certain jobs, rather than hiring employees. Even for part-time employees, companies are responsible for paying things like employment taxes and Social Security, none of which they have to worry about with independent contractors. There are benefits to working as a true independent contractor, but because independent contractors are not protected by the federal Fair Labor Standards Act (FLSA), workers have to meet very specific requirements in order to legally be considered independent contractors.
Under the FLSA, workers classified as independent contractors must be able to negotiate their own rates, have control over their own schedule, the environment they work in, and have a certain level of discretion as to how they perform their duties, among other things. Any and all workers who do not meet all of the necessary qualifications for independent contractors must be classified and compensated as employees, including benefits (such as health insurance) for full-time employees.
Many employers have been illegally classifying drivers as independent contractors and FedEx is just one of several companies to have recently faced multiple class action wage and hour lawsuits from drivers alleging they should have been classified as employees.
Current and former FedEx drivers from approximately 40 different states have been filing wage and hour lawsuits against the giant shipping company for more than ten years now. Many of those lawsuits were consolidated into multidistrict litigation (MDL) and then certified as class actions so that drivers from all across the country could combine their claims against FedEx.
An Indiana federal judge initially granted summary judgment in FedEx’s favor, ruling that the drivers met the requirements for independent contractors. But the class of drivers appealed that decision and the Ninth Circuit Court ruled in favor of the drivers, finding that the shipping company maintained the right to significantly dictate the way drivers carried out their jobs.
The Ninth Circuit then returned the case to Oregon federal court, whereupon the two sides spent several months negotiating a settlement agreement. All that time paid off because in spring of 2016 the parties asked the court to approve a settlement agreement, which recently received final approval from an Oregon federal judge.
The $15.4 million settlement includes $4.6 million in attorneys’ fees, plus more than $104,000 in legal costs and expenses. The rest will be paid out to the roughly 90% of the almost 400 class members who submitted eligible claims. Each class member is expected to receive anywhere from $500 to more than $130,000, depending on their individual claims for relief.
The settlement covers all eligible pickup and delivery drivers who worked for FedEx full time any time in the time frame beginning July 20, 1999 and ending September 18, 2015.
In addition, FedEx also said it stopped using the operations agreement, from which all these claims stem, as soon as the Ninth Circuit Court ruled the drivers did not meet the qualifications to be classified as independent contractors.
Now that the hard-won settlement agreement has gained final court approval, class members who submitted a valid claim can expect to see their payments arriving soon.
Our Chicago employment, non-compete agreement and business dispute attorneys have defended high level executives in covenant not to compete and trade secret lawsuits. A case in which our firm defended a former Motorola executive was covered in Crain’s Chicago business. You can view that article by clicking here.
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Lubin Austermuehle a Chicago business litigation law firm represents both plaintiffs and defendants in such cases, and can also help stop litigation before it starts by reviewing contracts to look for covenants and clauses that could create problems later. Our firm has also handled many shareholder and LLC disputes between owners of closely held corporations, and LLCs.
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