FedEx Ground Fined More than $190,000 for Misclassifying Drivers

Massachusetts Attorney General Martha Coakley has assessed penalties of more than $190,000 against FedEx Ground Package System Inc. for intentionally misclassifying 13 drivers as independent contractors rather than as employees. Coakley's office cited the company for violating the Massachusetts Independent Contractor Law by misclassifying the drivers, failing to provide a proper paystub, failing to provide workers’ compensation, not paying overtime to certain drivers, and neglecting to deduct and withhold state income taxes. In addition to the penalties, the citations require FedEx Ground to rectify the violations and provide restitution to the 13 drivers.

“Our office places a high priority on the proper classification of individuals in the workplace. The practice of misclassification does great harm, not only to misclassified workers and to the Commonwealth in the form of lost revenues, but also by putting law-abiding businesses at a disadvantage,” Coakley said. “We intend to pursue aggressively employers such as FedEx Ground when they violate the Commonwealth’s Independent Contractor Law.”

The contractor law provides that an individual performing any service shall be considered to be an employee unless: (1) the individual is free from control and direction in connection with the performance of the service, both under his or her contract for the performance of service and in fact; and (2) the service is performed outside the usual course of the business of the employer; and, (3) the individual is customarily engaged in an independently established trade, occupation, profession or business of the same nature as that involved in the service performed.

Coakley's office commenced an investigation into the practices of FedEx Ground during the summer of 2007 after receiving a driver’s complaint. Investigators concluded that the company intentionally violated all three prongs of the Independent Contractor Law by directing and controlling the activities of drivers and restricting the drivers’ ability to deliver for any other entity. In addition, the investigation found that the drivers are performing the core business of FedEx Ground. By misclassifying the drivers, the company deprives its drivers of health care benefits, access to unemployment insurance, worker’s compensation benefits, and in some cases, overtime pay, Coakley said. In addition, FedEx Ground deprives the Commonwealth of tax revenue by not deducting and withholding taxes from employee paychecks.

At least 400 drivers work for FedEx Ground throughout the Commonwealth, and the company has terminals in Billerica, Northboro, Wilmington, West Bridgewater, and on Martha’s Vineyard. Coakley said the investigation is ongoing.

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