FedEx Ground will pay $3 million to Massachusetts to settle claims that the company misclassified drivers as independent contractors.
State Attorney General Martha Coakley announced the agreement with Pittsburgh-based FedEx Ground July 15. She alleged the misclassification resulted in less revenue in payroll taxes, worker’s compensation and unemployment assistance for Massachusetts.
FedEx Ground denies liability in the settlement. A spokesman for the Pennsylvania-based subsidiary of FedEx did not return a request for comment.
In 2007, Coakley’s office cited FedEx Ground for violations of the state’s independent contractor law, which included failing to provide drivers with a proper pay stub and not paying overtime to certain drivers.
FedEx Ground appealed this to the Division of Administrative Law Appeals over penalties of more than $190,000. The AG then did further investigation with the Executive Office of Labor and Workforce Development and the Department of Revenue, which indicated significant underpayments to the revenue department, Coakley said.
The settlement amount is for these underpayments and to 13 drivers named in the AG’s citation. These drivers have a separate pending suit not affected by this settlement.
In May, FedEx Ground issued new standards for its then 12,000 owner-operators, including requiring independent contractors to be incorporated.
Last year, FedEx Ground was involved in 50 class action lawsuits, including 21 certified class actions. There were several individual lawsuits and 40 state tax and other administrative proceedings, which argued the company’s owner-operators should be classified as employees.
Most of the class-action lawsuits were consolidated for administration of the pre-trial proceedings by a single federal court, the U.S. District Court for the Northern District of Indiana.