18 DC VELOCITY MARCH 2015 www.dcvelocity.com
newsworthy
In a blow to independent contractors for transportation
companies who are seeking to be classified as employees
of the carriers they work with, a federal district judge in
Massachusetts ruled the state’s independent-contractor law
failed to override a 1994 federal statute pre-empting state
regulation of a motor carrier’s rates, routes, and services.
Ruling Feb. 5 in two separate cases, Judge
Robert G. Stearns found that because the
state law could have an impact on a carrier’s pricing and services, the federal statutes
must supersede its enforcement.
In one case, a four-year-old suit in which
11 contracted drivers at FedEx Ground,
the Pittsburgh-based ground parcel unit of
Memphis, Tenn.-based FedEx Corp., sued the unit seeking to be reclassified as employees, Judge Stearns granted
summary judgment in favor of the company. Summary
judgment is a court order entered without the benefit of a
full trial. The plaintiffs had sought the summary judgment.
In the other, two contractors for truckload and logistics
giant J.B. Hunt Transport Services Inc. sought the same
result as the FedEx Ground contractors. The judge dismissed the complaint outright.
The FedEx drivers have already appealed the ruling to
the 1st U.S. Circuit Court of Appeals in Boston, according
to Benesch, a law firm that specializes in transportation
issues and usually works on behalf of businesses. There was
no word on what action, if any, the plaintiffs in the Hunt
case would take. In a one-page summary of the judge’s
actions, Benesch called them “industry-favorable” and
“very positive.”
FedEx Ground, which uses a network of nonunion inde-
pendent drivers to keep down its operating costs, hailed
the ruling. “This decision affirms our view that companies
should have the option to contract with small businesses,”
said Perry Colosimo, a spokesman for the unit, in a state-
ment. “We have longstanding contractual relationships
with small businesses throughout Massachusetts that have
provided transportation services on our behalf.”
Colosimo added that the unit remains “committed to
protecting a business model that allows thousands of independent business owners, in Massachusetts and across the
country, the opportunity to own and operate their own
businesses.”
MIXED RECORD IN COURT
In the FedEx Ground case, Judge Stearns reversed his own
2013 ruling that the workers should be classified as employ-
ees under Massachusetts law. At the time, the judge ruled
that the drivers’ duties fell within the scope of the unit’s
business and thus qualified them under the state statute to
be classified as employees.
However, a three-judge panel of the same appellate court
ruled last September that the 1994 federal law overrides the
state statute as it relates to motor carrier operations. Using
the appellate court’s findings as a guidepost, the judge sub-
sequently withdrew his prior order.
FedEx Ground is involved in about 20
nationwide suits that revolve around the
nature of its contractor model. Its track
record of legal success has been hit or miss.
It took a sharp blow last August when an
appeals court panel in San Francisco ruled
that a class of 2,300 drivers in California
who from 2000 to 2007 were classified as contractors were
actually employees under California law. The case has been
returned to a federal district court in California for further
action. FedEx Ground did not appeal the ruling.
At the time, FedEx Ground said that since 2011, it has
only contracted with incorporated businesses that treat
their drivers as employees. The panel thus rendered a
decision on a business model that is no longer in use, the
company said.
For FedEx Ground and its parent, the issue is significant.
Adverse rulings, if upheld on appeal, could cost the company hundreds of millions of dollars in retroactive expenses,
from employee benefits to equipment obligations that had
been borne by the workers. The Internal Revenue Service
and state taxing authorities that are seeking to collect more
payroll tax-revenue income are interested in the cases.
Organized labor could also be emboldened to re-attempt
representation of FedEx Ground years after it was defeated
in organizing efforts.
Judge rules in favor of FedEx Ground, Hunt in Massachusetts
worker classification cases
CenterPoint Properties has constructed a
300,000-square-foot speculative facility at the
CenterPoint Intermodal Center–Kansas City. The
developer has also acquired a 167-acre rail-served
transload, packaging, and distribution campus in
Morris, Ill. The property is fully leased to bulk resin
transloader A&R Logistics. … Prologis, an operator
and developer of industrial logistics real estate, has
begun construction on a state-of-the-art distribution
facility at its Prologis Carlisle site in Pennsylvania. The
1,029,600-square-foot building represents Prologis’s
first speculative development since 2007.
ground breakers
