Last week, Judge Miller issued an order outlining the content and timing for the class notice order that will be sent to all potential class members.  The order centered on the national ERISA claim and the KS state claim but will seemingly be applied to all other state class claims.  Some key takeaways from the order: there will be one class notice (not two ie a separate notice for ERISA and second notice for state claim), there will be an opt-out process but there will not be an opt-out form included with the notice, language that threatens potential discovery by FedEx will not be included and FedEx will not insert propaganda into the notice.

On that last item, Judge Miller said:

FedEx seeks to add information about FedEx's right to express their opinion about the lawsuit.  While FedEx believes it needs to express to the class that it has a right to express its opinion, that is not the purpose of class notice.  Class notice is meant to inform the class of their rights, but it is not meant to protect the rights of the defendant.  (See In re Brand Name Prescription Drugs Antitrust Litigation, 1995 WL 23058 at *1.)  Consequently, this Court declines to entertain FedEx's suggestion that the notice include information about FedEx's  right to express its opinion.  (Original emphasis)

As for the timing, the final notice will be approved and an order directing the notice will be mailed will be sooner rather than later.

Based on this class definition, this Court certified class actions for the Kansas and ERISA case.  FedEx had the opportunity to raise arguments about the insufficiency of this definition while this Court considered FedEx's opposition to Plaintiff's motions for class certification.  This Court will not revisit whether the definition of the class is appropriate as a basis to delay class notice.   In summary FedEx has not offered any persuasive justification for delaying the issuance of class notice at this time.

Another FedEx delay tactic.  Another FedEx loss.

The second filing is the Plaintiff's brief on common proof.  This brief lays out some of the evidence that the drivers' lawyers will submit to prove the control over the drivers by FedEx to support a ruling that finds employee status.  Again, the drivers' lawyers here will offer evidence that goes to the common experience of drivers in the states where class claims have been certified.

There is a good discussion on the "individual versus policy" control factors over at FedExaminer.com for anyone who is interested.

This Anfinson case in King County (Washington) Superior Court has traveled a long and winding road between Washington court and the USDC in Northern Indiana.

But the Superior Court Judge certified the class in January 2008 as "all persons who performed services as a pick up and delivery driver or "contractor" for defendant during the period (Dec. 21, 2001 through Dec. 31, 2005) who signed (or did so through a corporate entity) a FedEx operating agreement and who handled a single route at some point during the class period; excluding persons who only performed or filed one or more of the following positions during the class period: multiple route contractors, temporary drivers, line-haul drivers or who worked for another contractor."

In light of the March 25 class certification orders in the MDL, the history of Anfinson and its long journey is interesting to say the least. 

In a Form 4 filed with the SEC Monday, the founder of the shipping giant bought the shares for $31.98 each, spending $9.6 million on the acquisition. Smith then disposed of 175,800 shares at prices ranging from $92.69 to $93.01.

FredEx's stock sales were in the open market.  So he exercises call options to buy the stock at $31.98, costing $9.6 million.  Then he sells 175,800 shares at an average of, say, $92.80 which nets him $16.3 million. 

FredEx has a realized gain of $6.7 million and an unrealized gain of an additional $8 million at current prices.  Of course, he has to pay capital gains taxes but he just put $7 million pre-tax into his pocket.

It seems like this split the baby in two-thirds ruling is making no one completely happy.  Drivers who are named plaintiffs will know the most about the views and developing strategies of their lawyers.

As for FedEx, two-thirds of a loss still is a loss.  This isn't NHL hockey.  The Orwellian talk of 'future of the majority' is the best spin they could muster.

To understand the size of FedEx's misclassification problem, one can ignore the company's yes-men and spokespodpeople but one must pay attention to the company's lawyers.  Here is what the FedEx Corporation said in its quarterly regulatory filing (enter FDX and read the latest 10-Q on Edgar) with the Securities and Exchange Commission on March 20:

Independent Contractor - Estrada. Estrada v. FedEx Ground is a class action involving single-route contractors in California. In August 2007, the California appellate court affirmed the trial court's ruling in Estrada that a limited number of California single-route contractors (most of whom have not contracted with FedEx Ground since 2001) should be reimbursed as employees for some of their operating expenses. The Supreme Court of California has affirmed the appellate court's liability and class certification decisions. The case has been remanded to the trial court for reconsideration of the amount of such reimbursable expenses and attorneys' fees. We do not expect to incur a material loss in the Estrada matter.

Independent Contractor - Other Lawsuits and State Administrative Proceedings. FedEx Ground is involved in approximately 45 other purported class-action lawsuits (including two that have been certified as class actions), several individual lawsuits and approximately 25 state tax and other administrative proceedings that claim that the company's owner-operators should be treated as employees, rather than independent contractors. Most (approximately 40) of the class-action lawsuits have been consolidated for administration of the pre-trial proceedings by a single federal court, the U.S. District Court for the Northern District of Indiana. With the exception of recently filed cases that have been or will be transferred to the multidistrict litigation, discovery and class certification briefing are now complete.

In October 2007, we received a decision from the court granting class certification in a Kansas action alleging state law claims on behalf of a statewide class and federal law claims under the Employee Retirement Income Security Act of 1974 on behalf of a nationwide class. The court also required the parties to submit briefs on the issue of whether the decision should be applied to the other actions pending class certification determination in the multidistrict litigation. In January 2008, the U.S. Court of Appeals for the Seventh Circuit declined our request for appellate review of the class certification decision.

In January 2008, one of the contractor-model lawsuits that is not part of the multidistrict litigation, Anfinson v. FedEx Ground, was certified as a class action by a Washington state court. The plaintiffs in Anfinson represent a class of FedEx Ground single-route, pick-up-and-delivery owner-operators in Washington from December 21, 2001 through December 31, 2005 and allege that the class members should be reimbursed as employees for their operating expenses and should receive overtime pay. The Anfinson case is scheduled for trial in June 2008. The other contractor-model lawsuits that are not part of the multidistrict litigation are not as far along procedurally as Anfinson.

FedEx Ground is also involved in several lawsuits, including three purported class actions, brought by drivers of the company's independent contractors who claim that they are jointly employed by the contractor and FedEx Ground.

Adverse determinations in these matters could, among other things, entitle certain of our contractors and their drivers to the reimbursement of certain expenses and to the benefit of wage-and-hour laws and result in employment and withholding tax and benefit liability for FedEx Ground, and could result in changes to the independent contractor status of FedEx Ground's owner-operators. We believe that FedEx Ground's owner-operators are properly classified as independent contractors and that FedEx Ground is not an employer of the drivers of the company's independent contractors.

Given the nature and status of these lawsuits, we cannot yet determine the amount or a reasonable range of potential loss, if any, but it is reasonably possible that such potential loss or such changes to the independent contractor status of FedEx Ground's owner-operators could be material. However, we do not believe that any loss is probable.

Independent Contractor - IRS Audit. On December 20, 2007, the Internal Revenue Service informed us that its audit team had concluded an audit for the 2002 calendar year regarding the classification of owner-operators at FedEx Ground. The IRS has tentatively concluded, subject to further discussion with us, that FedEx Ground's pick-up-and-delivery owner-operators should be reclassified as employees for federal employment tax purposes. The IRS has indicated that it anticipates assessing tax and penalties of $319 million plus interest for 2002. Substantially all of the IRS's tentative assessment relates to employment and withholding taxes for the 2002 calendar year and, if paid by the company, would be fully deductible. Similar issues are under audit by the IRS for calendar years 2004 through 2006. We are preparing to meet with the IRS audit team to review their tentative assessment and to provide an initial response. We expect that the meeting will occur during the fourth quarter of 2008 and that a final resolution of this matter will not occur for some time. We believe that we have strong defenses to the IRS's tentative assessment and will vigorously defend our position, as we continue to believe that FedEx Ground's owner-operators are independent contractors. Given the preliminary status of this matter, we cannot yet determine the amount or a reasonable range of potential loss. However, we do not believe that any loss is probable.

Soundbites are meaningless.  The damage control is hard to mask.  State court judges, federal court judges, National Labor Relations Board, state tax officials, and the IRS are putting the lie to FedEx's claim that a small group of former drivers are 'wrong' and the company's 'contractor' scam is right.

FedEx Ground and Home Delivery drivers need to keep their attention on the larger picture. 

But first, we should mention the other companies which use "contractors" that Fred Smith has cited positively. FredEx is trying to muddy the waters with apples:oranges comparisons with some of these but is also playing with fire by id'ing other companies that could draw the IRS stink eye.

Fred Smith in Jan 10, 2008 conference call: "There are many many major corporations in this country who use independent contractors - here are just a few of them: AllState, DirectTV, Dynamex, NASCAR, Publishers Circulation Fulfilment, Raymond James, State Farm, Velocity Express, Yellow Cab, Mary Kay, Avon, Lowes Home Depot, Mac Tools and so on down the line."

FedEx-cess: Inviting In the Big, Bad Government Wolf

By Chuck Muth CNSNews.com Commentary
March 17, 2008

We all know a few bad apples can spoil the whole barrel. And never is this saying truer than when it comes to a rogue company or industry abusing its privileges, thereby inviting the government to stick its nose even further into the business of business. Think Enron, and the resulting compliance nightmare known as Sarbanes-Oxley. Or just ponder the red-tape regulation-palooza headed the mortgage industry's way this year.

Which is why the nation's self-employed independent contractors need to be aware of the dangerous line FedEx is walking these days. The regulatory wolf rabidly believes that when it comes to imposing new controls on American businesses, it absolutely, positively has to be there overnight. And FedEx is inviting the hairy one with big fangs in.

At issue is the difference between being a self-employed independent contractor and a company employee. Generally speaking, independent contractors perform various services for various people. Employees work directly for one company. Independent contractors pay their own taxes and provide for their own benefits, such as health insurance and retirement. Employees have taxes deducted from their paychecks and receive unemployment benefits and workers comp.

Employees cost a company more money because of this, which is why many companies choose to outsource certain services to independent contractors. For example, a business might contract out grounds-keeping to an independent lawn care service rather than hire a full-time gardener. The independent lawn care owner, providing his services to various businesses, is self-employed; the full-time gardener is an employee.

The government, especially the IRS, doesn't much like independent contractors. If they had their way, every worker would be designated an "employee," thus falling under more of their direct control and scrutiny.

For their part, independent contractors don't much like government. They prefer to be, um, independent. Which is why an abuse of the independent contractor option by FedEx should be of grave concern to all true independent contractors.

At the heart of this matter is FedEx's claim that its delivery drivers are independent contractors and not employees. This claim seems laughable on its face, even for those who aren't familiar with the "official" definition of independent contractors. Let's face it, the drivers drive FedEx trucks, wear FedEx uniforms and identify themselves as FedEx representatives. I mean, come on. If it walks like a duck and quacks like a duck, it's not a gorilla, right?

<snip>

Or putting it even more plainly, the Appeals court stated flatly, "We affirm the finding that the drivers are employees." Period. And if FedEx continues trying to call a duck a gorilla, it will endanger the rights and prerogatives of all legitimate independent contractors.

This is not to say I agree with the government's position on this issue. In my opinion, every worker should have the right to freely enter into whatever kind of employment relationship the worker and the employer deem acceptable to both parties with no government intrusion whatsoever. But the reality is that Big Brother already has its hooks in the employment market and there are those in Congress who would like to further put the squeeze on independent contractors.

FedEx's abuse of the independent contractor provision will only add fuel to the regulatory fire. They should cut their losses and change their employment practices before the big, bad wolf comes for the rest of us.

The New York Department of Labor has listed a number of ways to send tips on misclassification to the proper authorities:

Misclassification of workers occurs when an employer improperly treats an individual as an independent contractor instead of as an employee. Because of this labeling, some employers attempt to avoid complying with unemployment insurance, workers’ compensation, social security, tax withholding, temporary disability, and minimum wage and overtime laws that protect workers. Paying workers off the books also fraudulently deprives workers of the protections they deserve. These practices also put law-abiding business at a competitive disadvantage because of the significant unemployment insurance and workers’ compensation expenses they incur for their employees.

The Joint Enforcement Strike Force includes staff from: the Department of Labor, the Attorney General’s Office, the Department of Taxation and Finance, the Workers’ Compensation Board and the New York City Comptroller’s office.

If you believe that you have been misclassified by your employer and want to file a complaint, please contact the Task Force in the department's Employer Fraud Unit, 24-hours a day at 1-866-435-1499. You may also contact the Task Force, weekdays at 518-485-2144 between 8am and 4pm or send us an email to dol.misclassified@labor.state.ny.us

Please complete the Tip Sheet and fax it to 518-485-6172 or mail it to:

New York State Department of Labor
Liability and Determination, Fraud Unit
W.A. Harriman State Office Campus
Building 12 - Room 356
Albany, New York 12240

If you think an employer is committing fraud by misclassifying its workers or is committing violations of New York State laws related to the employment of workers, it is important that you let us know about it. All allegations of fraud and violations are taken seriously, and you can remain anonymous. Please include as much information as possible. All information will be maintained in a fully secure environment.

FedEx Ground and FedEx Home Delivery drivers in New York should make good witnesses.
]]> 2008-02-12T19:18:00-05:00 http://www.fedexwatch.com/commentary/entries/worcester_newspaper_on_northboro/ Although the headline writer at the Worcester newspaper was fooled, the reporter filed a piece that puts the FedEx drivers and Local 170 decision to not hold the Feb 1 election in the proper context. 

Much of what happened in Northboro was also documented in the ARAW/LCCR report "Fed Up at FedEx" with statements by a number of the present and former drivers from that terminal.

The Associated Press put the decision to not go ahead with the election in the proper context.  The drivers in Northboro continue to cooperate with the Massachusetts Attorney General in her investigation into FedEx Ground's misclassification of its workforce in the Commonwealth.

This is a step so that we can come back to Northboro when the conditions are safer for the drivers and they feel free to vote without intimidation. 

And what did FedEx have to say about their latest loss in courts?  Nothing of substance just more denial .

In a decision received today, the United States Court of Appeals for the Seventh Circuit declined to hear the request of FedEx Ground, an operating unit of FedEx Corp. for interlocutory review of the class certification decision in the Kansas case pending before the United States District Court in Indiana. The decision had granted class certification on the Kansas state claims and a national ERISA claim.

The court did not rule on the validity of the contractor model and has not decided class certification in any other multi-district litigation case. FedEx Ground will continue to vigorously defend the MDL.

This procedural ruling does not change any aspect of the FedEx Ground operation and we will continue to provide the world-class service our customers have come to expect.

The most likely next step in this case is that the federal judge in Indiana will certify most if not all of the other state claims.  The stakes will get raised even higher for FedEx after that.