In a decision dated August 27, 2014, a three-judge panel of the U.S. Court of Appeals for the Ninth Circuit found that FedEx had a "right to control" the activities of 2,300 of its drivers. Normally, in the logistics and delivery business, this would not be exceptionally important news, except for the fact that FedEx has litigated this issue extensively in the past, and has gone to great lengths to devise an independent contractor based business model which would comply with California law.
The Ninth Circuit found, essentially, three areas in which FedEx established control over the drivers at issue.
First, the court found that FedEx controlled the appearance of its drivers and their vehicles, "from their hats down to their shoes and socks." FedEx also required the drivers to be "clean shaven, hair neat and trimmed, [and] free of body odor."
In doing so, the Alexander court cites another recent Ninth Circuit case, Ruiz v. Affinity Logistics Corp., No. 12-56589, 2014 WL 2695534, at *7 (9th Cir. June 16, 2014), finding right to control under California law where a delivery company controlled "every exquisite detail" of the drivers' appearance, including the "color of their socks" and "the style of their hair." For more information regarding the issue of independent contractor delivery drivers in California, please reference my recent article here, discussing Ruiz v. Affinity.
Second, the court found that FedEx controlled the times the drivers could work, and that FedEx had a great deal of control over the extent of the drivers' work day, structuring the driver workloads so that they were required to work a consistent 9.5 to 11 hours every working day. While the court's findings as to the significant control over the drivers' appearance should not came as any surprise, the court's findings as to work hours is a bit troubling. There are many, legitimate contractors who provide their services within a consistent time framework. It's simply how most people prefer to work, given the choice. Even people who operate their own non-contractor business operations, tend to prefer to work a consistent, predictable shift-like period.
Third, the court found that FedEx controlled aspects of how and when drivers deliver their packages, assigning each driver a specific service area, which FedEx "may, in its sole discretion, reconfigure." FedEx also required the drivers to "[f]oster the professional image and good reputation of FedEx" and to "conduct all business activities with . . . proper decorum at all times." This third prong of the court's findings should not be a surprise, either. The requirement for the contractors - ostensibly running their own businesses - to conduct themselves with "proper decorum" is simply too much control over the contractors' behavior.
The court went on to analyze FedEx's relationship with the drivers under what are called the California "secondary factors," as well, finding that these factors pointed toward employment.
Ultimately, the case does tend to reinforce just how hard it is to practice an independent contractor business model in California. Williams & Associates is noticing a trend in heightened California enforcement efforts and more stringent judicial decisions regarding the use of independent contractor labor by California businesses. There are ways to use independent contractor labor in California without subjecting your business to increased risk and associated costs of doing so. It is, however. a business model which requires genuine attention in regard to which workers can be classified as contractors and which must be classified as employees, and a willingness to accept some risk that contractors may not perform to expectations, and may indeed even breach the terms of the contract.
Most importantly, Alexander v. FedEx should serve as a stern reminder to California businesses that similar, absurdly-detailed controls over contractor behavior will be met with a court's disapproval.
One excellent way to establish a genuine contractor relationship is by the terms of the written agreement between the business and the contractor. Many times, and in the case of Alexander v. FedEx, the contract evidences substantial control over the worker. There are ways to sufficiently define the requirements of the contracted service, without exerting control over the worker.