Craig v. FedEx Ground Package Sys.
Inc., 7th Cir., No. 10-3115, 7/12/12
Key Holding:Certification of independent contractor issue to Kansas
Supreme Court appropriate in view of uncertain state law.
Potential Impact:Seventh Circuit will stay proceedings on 20 other
appeals on status of FedEx Ground drivers in other states.
By Lawrence E. Dubé
The U.S. Court of Appeals for the Seventh Circuit July 12 decided that the
lead case among 21 appeals concerning alleged misclassification of drivers by
FedEx Ground Package Systems Inc. should be referred to the Kansas Supreme Court
for an interpretation of state law (Craig v.
FedEx Ground Package Sys. Inc., 7th Cir., No. 10-3115, 7/12/12).
Finding the Kansas court “is in a better position than we to say what Kansas
law is,” Judges Frank H. Easterbrook, Ilana Diamond Rovner, and John Daniel
Tinder joined in a per curiam order certifying to the state court the issue of
whether FedEx Ground drivers are employees as a matter of law under the Kansas
Wage Payment Act. A federal district court ruled for FedEx in 2010, holding that
the Kansas drivers were independent contractors outside the protection of the
The Seventh Circuit, which delayed briefing of other cases while it
considered the Kansas case, said it will now stay all proceedings in the federal
appeals court while the Kansas Supreme Court deliberates.
The decision came in a case that was one of dozens in a multidistrict
proceeding that combined lawsuits brought on behalf of current and former FedEx
Ground drivers from across the United States. Class claims under state law in
different states included a variety of allegations that FedEx's
misclassification of the drivers as independent contractors had resulted in
violations of state wage and hour laws as well as state law principles of fraud
and unjust enrichment.
On Aug. 11, 2010, the U.S. District Court for the Northern District of
Indiana granted summary judgment to FedEx in one case brought on behalf of
Kansas drivers, finding that Pamela Page and other drivers were independent
contractors rather than FedEx employees ( 734 F. Supp. 2d 557, 16 WH Cases 2d
980 (N.D. Ind. 2010); 28 HRR 914, 8/23/10). After issuing that decision, Judge
Robert L. Miller directed the parties in all of the remaining cases to file
supplementary briefs arguing why the outcome in those proceedings should be any
different than in the Kansas case.
Four months later, the trial court wrote that “Kansas law is not strangely
alien or sui generis, but rather is very typical of the states' laws on
determining employment status,” and found that most of the drivers used by the
company in other states were properly classified as independent contractors
under state labor and employment laws ( 758 F. Supp. 2d 638, 17 WH Cases 2d 129
(N.D. Ind. 2010); 28 HRR 1351, 12/20/10).
Appeals were filed in the Seventh Circuit, and the court accepted the
parties' suggestion to first consider Carlene Craig's appeal of the ruling on
Kansas drivers before attempting to resolve the disputes arising under different
The appeals court said the federal courts had jurisdiction over the Kansas
case based on differences in state citizenship between FedEx Ground and the
drivers. In diversity cases, the court said, the task of a federal court is to
ascertain the substance of state law as it has been determined by the state's
highest court or to predict how the state high court would resolve the case.
Kansas courts have looked to the state workers' compensation law in
interpreting the KWPA, the Seventh Circuit said, observing that the “right of
control” is the most important consideration, but not the only, in determining
whether a worker is an employee or an independent contractor.
State courts have applied the workers' compensation law in cases involving
truck drivers, the court said, but it found “the cases are difficult to
reconcile and reflect that the determination of whether an employer-employee
relationship exists is based on the facts in each case.”
The Seventh Circuit added that courts outside Kansas have also reached
different conclusions about the employee or independent contractor status of
drivers employes by FedEx Ground and by FedEx Home Delivery.
“The question of the plaintiffs' employment status under Kansas law is
outcome determinative” and “a close one,” the appeals court said. It added that
“we are unguided by any controlling Kansas Supreme Court precedent.”
Calling the independent contractor issue “of great importance not just to
this case but to the structure of the American workplace,” the court said a
decision would likely have a major impact on FedEx, its competitors, and
employers in other industries.
Stating that the Craig appeal requires an interpretation of the meaning of
“employee” under the KWPA, the Seventh Circuit asked the Kansas Supreme Court to
determine whether the drivers in the case are employees as a matter of law under
the Kansas statute.
Additionally, the appeals court observed that drivers were allowed to acquire
more than one service area for FedEx Ground deliveries. The Seventh Circuit
asked the Kansas court to address whether its answer on employee status would be
different for a driver with more than one service area.
Text of the opinion is available at http://op.bna.com/dlrcases.nsf/r?Open=ldue-8w5p7v.