In a closely watched case last year, the Ninth Circuit ruled that FedEx’s drivers are employees—not independent contractors—as a matter of law under California’s “right-to-control” test. Alexander v. FedEx Ground Package Sys., Inc., 765 F.3d 981 (9th Cir. 2014). As set forth by the California Supreme Court, the touchstone of that test is “whether the person to whom service is rendered has the right to control the manner and means of accomplishing the desired result.” S.G. Borello & Sons, Inc. v. Department of Industrial Relations, 769 P.2d 399, 404 (Cal. 1989). In concluding that FedEx’s drivers are employees, the Ninth Circuit rejected the Northern District of California Court’s finding that the drivers were independent contractors based on the express language of the FedEx employment agreement.
The reasoning behind the Ninth Circuit’s opinion was best captured by Judges Trott and Goodwin in their concurrence, which offered the following anecdote: Abraham Lincoln reportedly asked, “If you call a dog’s tail a leg, how many legs does a dog have?” His answer was, “Four. Calling a dog’s tail a leg does not make it a leg.”
Alexander, 765 F.3d at 998. Along these lines, the court reasoned that “when called upon to characterize a written enactment” the tribunal should “look to the ‘underlying reality rather than the form or label.’” Id. Specific factors the Court considered include the fact that FedEx’s drivers are required to wear FedEx uniforms (“a uniform shirt with the FedEx logo, uniform pants or shorts, dark shoes and socks, and, if the driver chooses to wear a jacket or cap, a uniform jacket and cap with the FedEx logo”), drive FedEx-approved vehicles (among other requirements, painted “FedEx white” and marked with the FedEx logo), and groom themselves according to FedEx’s appearance standards (“clean shaven, hair neat and trimmed”). Id., at 986-87. Further, the fact that FedEx’s drivers are scheduled to work 9.5 to 11 hours every working day; are not supposed to leave their terminals in the morning until all of their packages are available; and must return to the terminals no later than a specified time, effectively means that “FedEx tells its drivers what packages to deliver, on what days, and at what times.” Id., at 987. Finally, because FedEx negotiates the delivery window for packages directly with its customers, drivers lack control over when specific packages must be delivered. Altogether, the Ninth Circuit held that these stringent controls exercised over the conduct, appearance, and schedule of its drivers meant that the drivers are properly considered “employees” regardless of the label attributed to them by their employment agreements.
The Court also noted that a majority of the so-called “secondary factors” outlined in Borello supported a finding that FedEx’s drivers were employees. For example: the second factor (distinct occupation or business), third factor (whether the work is performed under the principal’s direction), fourth factor (skill required in the occupation), fifth factor (length of time for performance of services), and eighth factor (whether the work is part of the principal’s regular business), all suggested the drivers are employees. The remaining factors were either neutral (method of payment), or favored FedEx (the right to terminate at will, the provision of tools and equipment, the parties’ beliefs).
The lesson for California employers: a cleverly-drafted employment agreement is not enough to turn an employee into an independent contractor.