3 States Accuse FedEx of Misclassifying Drivers as Independent Contractors

Three states said Tuesday they plan to sue FedEx Corp., accusing the second-largest U.S. package delivery company of violating labor laws by illegally classifying drivers as independent contractors rather than employees to save money.

The attorneys general of New York, New Jersey and Montana intend to begin litigation against FedEx Ground Package System Inc after Oct. 27, saying the unit of Memphis, Tennessee-based FedEx has caused a “serious injustice” to more than 1,000 drivers in the three states.

According to a letter to FedEx Ground released by New York Attorney General Andrew Cuomo, the misclassification causes the drivers to be deprived of workers’ compensation coverage and the protection of state anti-discrimination and labor laws.

The states said this occurs though FedEx subjects the drivers to strict work rules, down to the colors of their socks, and to thousands of dollars of expenses to buy or lease trucks and use company uniforms and scanners.

In addition, the states said FedEx’s actions deprive them of tax payments and result in unfair competition.

“By blatantly misclassifying its drivers, FedEx Ground has denied these individuals the employment rights they are guaranteed by law,” Cuomo said in a statement.

Anne Milgram and Steve Bullock, the attorneys general of New Jersey and Montana, joined Cuomo in the litigation threat.

FedEx did not immediately return requests for comment.

The company has long battled critics including the Teamsters labor union and has faced some lawsuits over its worker classification practices. It has said FedEx Ground drivers can operate their own businesses as they wish.

FedEx Ground is based in Moon Township, Pennsylvania, near Pittsburgh.

The states said they intend to seek restitution, damages and civil penalties. They gave FedEx until Oct. 27 to show why a lawsuit should not be filed.

FedEx shares rose $1.45, or 1.8 percent, to $81.44 in afternoon trading on the New York Stock Exchange, and on Tuesday hit their highest level since September 2008.

(Reporting by Jonathan Stempel; Additional reporting by Aarthi Sivaraman in Seattle)