FedEx Corp. said Tuesday it lost a long-running legal dispute
with nearly 500 drivers in Kansas over its former practice of
classifying some of its U.S. delivery drivers as independent
contractors.
The Seventh Circuit Court of Appeals last week issued an order
and opinion concluding that members of a Kansas class-action suit
are employees, not independent contractors. The court sided with
the Kansas Supreme Court, which had issued a similar opinion last
year.
"The application of Kansas law to FedEx's relationship with its
drivers has been authoritatively decided by the Kansas Supreme
Court," the Seventh Circuit Court said in its opinion.
The Kansas drivers sued FedEx Ground in 2003 to recoup
retroactive costs and expenses, as well as overtime wages. FedEx,
which disclosed the court decision in its annual filing with
securities regulators, said it had already made provisions in case
of a loss in the Kansas case.
FedEx hasn't used the disputed independent-contractor business
model since 2011, when it switched to using only incorporated
businesses that employ its ground delivery drivers.
Other companies, including Uber Technologies Inc., have recently
faced legal challenges due to their use of the
independent-contractor model, and the FedEx decisions could
influence those cases.
The decision may have a broader impact on 19 other class-action
suits against FedEx currently pending before the Seventh Circuit.
FedEx has asked that the other 19 cases be decided separately, due
to differences in state laws. The Seventh Circuit last week
referred those cases to a court representative to set up additional
briefings and arguments.
Legal experts have said that the Kansas Supreme Court decision
could affect rulings in the other cases, despite differences in
state laws.
The decision follows a settlement by FedEx with California
drivers in June. The company said it would pay $228 million to
settle the case after a Ninth Circuit Court of Appeals panel ruled
against the company on the issue last year.
Write to Laura Stevens at laura.stevens@wsj.com
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