Case Study:
Estrada v. FedEx Ground Package System, Inc.
In the following case, the court sought to determine whether Federal Express drivers were employees or independent contractors for purpose of certifying them as a class for the limited purpose of allowing them to receive reimbursement for work-related expenses.
Men and women who apply to FedEx for positions as drivers must complete applications, submit to background checks and strength tests, and satisfy appearance standards. The only required skill is driving and no commercial driving experience is needed . . . Upon acceptance, a driver must execute a nonnegotiable “Pick-up and Delivery Contractor Operating Agreement” that obligates him to “provide daily pick-up and delivery service, and to conduct his . . . business so that it can be identified as being a part of the [FedEx] system.” The Operating Agreement identifies the driver as an “independent contractor, and not as an employee . . . for any purpose,” sets forth the parties’ “mutual business objectives,” notes that “the manner and means of reaching [these objectives] are within the discretion of the [driver],” and states that “no officer or employee of [FedEx] shall have the authority to impose any term or condition [including hours of work or travel routes] contrary to this understanding.” * The Operating Agreement obligates the driver to try to “retain and increase” business within his primary service area, to “cooperate” with FedEx’s employees, customers, and other drivers for the common goal of efficient pickup and delivery, to load, handle, and transport packages using methods designed to avoid theft, loss and damage, and to foster FedEx’s “professional image” and “good reputation.” The driver agrees to drive safely, to prepare driver logs, inspection reports, fuel receipts, and shipping documents, and (on a daily basis) to return these items and any collected charges and undeliverable packages to FedEx. He agrees to wear a FedEx-approved uniform and to maintain his appearance “consistent with reasonable standards of good order,” his uniform “in good condition,” and his truck in a “clean and presentable fashion.” *** The trial court found, and set forth in its statement of decision, that the drivers were FedEx employees, not independent contractors, and that they had not been indemnified for any of the expenses at issue. . . The essence of the trial court’s statement of decision is that if it looks like a duck, walks like a duck, swims like a duck, and quacks like a duck, it is a duck.
Discussion
The trial court found that, for purposes of determining the drivers’ right to reimbursement for their expenses, the drivers are employees. FedEx contends the trial court is wrong. We disagree.
A. Subdivision (a) of section 2802 [of the Labor Code] provides that “[a]n employer shall indemnify his or her employee for all necessary expenditures or losses incurred by the employee in direct consequence of the discharge of his or her duties.” Because the Labor Code does not expressly define “employee” for purposes of section 2802, the common law test of employment applies. The essence of the test is the “control of details”—that is, whether the principal has the right to control the manner and means by which the worker accomplishes the work—but there are a number of additional factors in the modern equation, including (1) whether the worker is engaged in a distinct occupation or business, (2) whether, considering the kind of occupation and locality, the work is usually done under the principal’s direction or by a specialist without supervision, (3) the skill required, (4) whether the principal or worker supplies the instrumentalities, tools, and place of work, (5) the length of time for which the services are to be performed, (6) the method of payment, whether by time or by job, (7) whether the work is part of the principal’s regular business, and (8) whether the parties believe they are creating an employer–employee relationship. The parties’ label is not dispositive and will be ignored if their actual conduct establishes a different relationship. FedEx contends the trial court misapplied the test (by an erroneous analysis of the “right to control” factor and otherwise) and made “insupportable inferences of fact” in determining that the drivers are employees. We disagree First, FedEx’s assumptions are wrong. Although it is true that the Operating Agreement says “the manner and means” to satisfy the objectives of the contract “are within the discretion of the [drivers],” and that FedEx does not have the “authority to impose any term or condition” to the contrary, the evidence shows unequivocally that FedEx’s conduct spoke louder than its words. As noted above, the parties’ label is not dispositive and will be ignored if their actual conduct establishes a different relationship. The same is true with regard to FedEx’s claim that it cannot terminate the drivers at-will. Although the Operating Agreement provides for termination with cause, it also provides for nonrenewal without any cause at all—and substantial evidence established that FedEx discharges drivers at-will. Second and most significantly, the trial court’s findings are supported by substantial evidence. FedEx’s control over every exquisite detail of the drivers’ performance, including the color of their socks and the style of their hair, supports the trial court’s conclusion that the drivers are employees, not independent contractors. The drivers must wear uniforms and use specific scanners and forms, all obtained from FedEx and marked with FedEx’s logo. The larger items—trucks and scanners— are obtained from FedEx approved providers, usually financed through FedEx, and repaid through deductions from the drivers’ weekly checks. Many standard employee benefits are provided, and the drivers work full time, with regular schedules and regular routes. The terminal managers are the drivers’ immediate supervisors and can unilaterally reconfigure the drivers’ routes without regard to the drivers’ resulting loss of income. The customers are FedEx’s customers, not the drivers’ customers. FedEx has discretion to reject a driver’s helper, temporary replacement, or proposed assignee. Drivers—who need no experience to get the job in the first place and whose only required skill is the ability to drive—must be at the terminal at regular times for sorting and packing as well as mandatory meetings, and they may not leave until the process is completed.*1 The * FedEx’s reliance on State Compensation Ins. Fund v. Brown (1995) 32 Cal.App.4th 188, is misplaced. Although that case observes that “truck driving—while perhaps not a skilled craft—requires abilities beyond those possessed by a general laborer” ( id. at pp. 202–203), the finding of inde-pendent contractor status in that case is based primarily on the facts that the truck drivers worked for more than one broker at a time and were compensated on a job-by-job basis, “with no obligation on the part of the [drivers] to accept any assignment and no retribution . . . for refusing assignments.” ( Id. at p. 203.)
drivers are not engaged in a separate profession or business, and they are paid weekly, not by the job. They must work exclusively for FedEx. Although they have a nominal opportunity to profit, that opportunity may be lost at the discretion of the terminal managers by “flexing” and withheld approvals, and for very slight violations of the rules. Most drivers have worked for FedEx for a long time (an average of eight years), and drivers employed by FedEx’s competitors (UPS, DHL, and FedEx’s sister corporation, FedEx Express) are classified as employees. Based on these facts, we reject FedEx’s contention that this is a “true entrepreneurial opportunity depending on how well the [drivers] perform” and conclude that substantial evidence supports the trial court’s finding that the drivers are employees, not independent contractors, for purposes of section 2802.
Disposition
The judgment is reversed (1) insofar as it awards $12,373,875 to plaintiffs for their attorneys’ fees and costs and (2) insofar as it disallowed the expenses; in all other respects, the judgment is affirmed and the cause is remanded to the trial court with directions to conduct such further proceedings as are necessary to determine the amounts to which the drivers are entitled for outof-pocket expenses and the amounts due for their work accident insurance premiums, and to thereafter determine the reasonable amount of fees and costs to be awarded. Estrada is entitled to his costs of appeal.
Q1. The court based part of its decision on the fact that “FedEx’s conduct spoke louder than its words.” Is there any way that words can “un-do” conduct? No matter what the conduct is, can words override conduct under any circumstances, based on the Estrada case?
Q2. If you were legal counsel to Federal Express before the fact, how might you counsel it to ensure that its original intent would be supported by the court? Is it as basic as allowing drivers to wear socks of the color of their choice (“FedEx’s control over every exquisite detail of the drivers’ performance, including the color of their socks and the style of their hair, supports the trial court’s conclusion that the drivers are employees, not independent contractors”)?
Your answer must be typed, double-spaced, Times New Roman font (size 12), one-inch margins on all sides, APA format.