DC Velocity - September 2014

A three-judge federal appeals court panel in California invalidated FedEx Corp.’s model of using independent contractors to operate ground delivery services in California and Oregon, ruling that FedEx exercises sufficient control over the drivers to make them company employees under their states’ laws.

The Aug. 27 ruling by the Ninth Circuit Court of Appeals isn’t the first to question the legality of FedEx’s independent-contractor model on the grounds that the relationship between the company and its ground delivery drivers is so closely intertwined that they can’t be considered contractors. However, the panel’s ruling could be the most significant to date because it affects FedEx’s operations in the nation’s most populous state as well as the neighboring states that fall under the Ninth Circuit’s jurisdiction.

The 35-page ruling consisted mostly of a
32-page opinion by Judge William A. Fletcher;
the last three pages covered concurring opin-
ions by Judges Alfred T. Goodwin and Stephen
S. Trott. From a day-to-day business stand-
point, Judge Trott may have made the most
powerful statement in the order by writing that
the decision “substantially unravels FedEx’s
business model.”
The ruling reverses a December 2010 decision
by the Multidistrict Litigation Court (MDL) in
Indianapolis that ruled the employees were
independent contractors. The MDL, which is
part of the federal court system, hears similar
cases that have been brought in multiple juris-
dictions. In this matter, FedEx requested that all
the cases involving the employment status of its
ground delivery drivers be consolidated in one
region. The panel said that it would return the
case to a federal district court in California for
further consideration.

Concurrently, the panel ruled in two other cases that FedEx Ground drivers in Oregon who worked for the company from 1999 to 2009 should also be considered employees. Those rulings affect fewer drivers than in California.

Judge Fletcher ruled that the operating agree-

Appeals court panel strikes down FedEx Ground independent contractor model in California

The U.S. Department of Transportation has named T.F. Scott Darling III, chief counsel of the Federal Motor Carrier Safety Administration (FMCSA), as acting administrator to succeed Anne S. Ferro, whose term as administrator ended August 22.

In a related development, FMCSA Deputy Administrator Bill Bronrott will leave the agency by the end of the year, Ferro said in a letter to employees. Bronrott has spent more than four years at DOT. No replacement has been named.

President Obama appointed Darling as FMCSA chief counsel in September 2012. He came to the agency from the Massachusetts Bay Transportation Authority, the public transit agency serving the greater Boston area, where he served as the deputy chief of staff and assistant general counsel.

Ferro will become president and CEO of the American Association of Motor Vehicle Administrators (AAMVA). AAMVA members are responsible for the issuance of commercial drivers licenses (CDLs). The group provides best-practice guidelines, training programs, and operational guidance to support those efforts.

AAMVA also runs the Commercial Drivers License Information System (CDLIS) that enables states to ensure that each commercial driver has only one license and one complete driver record. Roadrunner buys Active Aero for $115 million in cash Darling, FMCSA chief counsel, named as agency’s acting administrator

Roadrunner Transportation Systems Inc. continued its acquisition spree by announcing that it had bought Active Aero Group, a provider of air and ground expedited transport services, for $115 million in cash.

The acquisition is Cudahy, Wis.-based Roadrunner’s fourth so far this year, and further broadens the company’s offerings beyond its traditional long-haul, less-than-truckload (LTL) service. Roadrunner’s three prior acquisitions allowed it to gain footholds in the international logistics, U.S.-Mexico, and warehousing markets.

Based in Belleville, Mich., Active Aero mostly operates in the United States and has a smaller operation in Mexico. It owns 10 all-cargo aircraft and operates 50 trucks that are mostly owned by independent contractors. Active Aero generated about $265 million in revenue during the 12-month period ending June 30. The transaction is expected to close by the end of Roadrunner’s third quarter on Sept. 30.

“The ability to provide air and ground expedited services to meet customers’ total transportation needs has been a key strategic objective for Roadrunner,” said Mark DiBlasi, Roadrunner’s president and CEO, in a statement.