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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 KWPA.
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 state laws.
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.
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