N.Y. attorney general sues FedEx over driver status

New York Attorney General Andrew Cuomo sued FedEx Corp. in state court Friday, saying the delivery company improperly classifies ground delivery drivers as independent contractors rather than employees.

In the suit, filed in New York’s Supreme Court, Cuomo said the company’s FedEx Home Delivery service classifying its drivers as contractors rather than employees fails “to provide its drivers the rights” afforded other employees and does not comply with the state’s labor laws.

The contractor model gives FedEx’s Ground unit a cost advantage of as much as 30 percent over rival United Parcel Service Inc., University of Pittsburgh business professor Marick Masters has estimated.

“FedEx has the power to control, and does in fact control, almost all aspects of its drivers’ work,” including “hours, job duties, routes, and even clothing,” Cuomo said in the filing. “The drivers are clearly perceived by the public to be employees.”

The Memphis, Tenn.-based company, which has a distribution hub in Indianapolis, says its contract-driver model is legal and was approved for tax purposes by the U.S. Internal Revenue Service in 1994.

Some FedEx drivers have filed private litigation. FedEx in June won partial dismissal of a class-action lawsuit filed in Indiana by contract drivers who contend they are entitled to full benefits because the company treats them as employees. them as employees.

A federal judge in South Bend, threw out some claims in the suit, saying the workers failed to exhaust out-of-court, administrative procedures that might help them get the medical, dental and retirement benefits they seek.

The company’s Home Delivery service has 701 contractors that, combined, employ 2,500 workers, said Maury Lane, a FedEx spokesman. The average contractor had revenue of $190,000, he said, with the 10 largest billing an average of $2.6 million in 2009.

“It is disappointing that in the midst of his campaign for governor Attorney General Cuomo would choose to destroy that many jobs in New York,” Lane said, commenting after reviewing a copy of the filing.

“Any suggestion that the Attorney General’s office handling of this case is improper is absurd,” John Milgrim, a spokesman for Cuomo, said in an e-mailed statement. “This office and a group of other states had been negotiating with FedEx for months. The case was filed, as was a similar case by Kentucky, when those discussions broke down,” Milgrim said.