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Alexander v. FedEx Ground Package Sys., Inc.

United States Court of Appeals, Ninth Circuit

August 27, 2014

DEAN ALEXANDER; PETER ALLEN; ALBERT ANAYA; SUZANNE ANDRADE; JARRETT HENDERSON; ELY INES; JORGE ISLA; PAUL INFANTINO; ERIK JEPPSON; GUPERTINO MAGANA; BERNARD MENDOZA; JESSE PADILLA; JOEY RODRIGUEZ; DALE ROSE; ALLAN ROSS; AGOSTINO SCALERCIO; DEAN WILEY; ANTHONY YBARRA, on behalf of themselves and all persons similarly situated, Plaintiffs-Appellants,
v.
FEDEX GROUND PACKAGE SYSTEM, INC., DBA FedEx Home Delivery, Defendant-Appellee. DEAN ALEXANDER; PETER ALLEN; ALBERT ANAYA; SUZANNE ANDRADE; JARRETT HENDERSON; ELY INES; JORGE ISLA; PAUL INFANTINO; ERIK JEPPSON; GUPERTINO MAGANA; BERNARD MENDOZA; JESSE PADILLA; JOEY RODRIGUEZ; DALE ROSE; ALLAN ROSS; AGOSTINO SCALERCIO; DEAN WILEY; ANTHONY YBARRA, on behalf of themselves and all persons similarly situated, Plaintiffs-Appellees,
v.
FEDEX GROUND PACKAGE SYSTEM, INC., DBA FedEx Home Delivery, Defendant-Appellant

Argued and Submitted March 6, 2014, Portland, Oregon

Page 982

[Copyrighted Material Omitted]

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U.S. District Court for the Northern District of California, D. C. No. 3:05-cv-00038-EMC--Hon. Edward M. Chen, District Judge, Presiding

Appeal fro a judgment of the U.S. District Court for the Northern District of California. Judgment reversed and matter remanded.

SUMMARY[*]

California Law

The panel reversed the Multidistrict Litigation Court's grant of summary judgment entered in favor of FedEx Ground Package System, Inc., and its denial of a plaintiff class of FedEx drivers' motion for partial summary judgment in a class action alleging that FedEx drivers in California were employees rather than independent contractors.

The panel held that the plaintiff FedEx drivers were employees as a matter of law under California's right-to-control test. The panel remanded to the district court with instructions to enter summary judgment for plaintiffs on the question of employment status.

Judge Trott, joined by Judge Goodwin, concurred. Judge Trott wrote that FedEx's labeling of the drivers as " independent contractors" in its Operating Agreement did not conclusively make them so.

For plaintiffs-appellants/cross-appellees--Leonard Cardner, LLP, Oakland, California, by Beth A. Ross (argued), Aaron D. Kaufmann, Elizabeth C. Morris; and Ellen Lake, Oakland, California

For defendant-appellee/cross-appellant--O'Melveny & Myers LLP, Washington, D.C., by Jonathan Hacker (argued); O'Melveny & Myers LLP, New York, New York, by Anton Metlitsky; O'Melveny & Myers LLP, San Francisco, California, by Chris Hollinger; O'Melveny & Myers LLP, Los Angeles, California, by Carolyn Kubota, Robert Swerdlow

For Amici Curiae American Trucking Associations, Inc., and California Trucking Association, as amici curiae, by Richard Pianka, Arlington, Virginia

Before: Alfred T. Goodwin, Stephen S. Trott, and William A. Fletcher, Circuit Judges.

OPINION

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W. FLETCHER, Circuit Judge.

As a central part of its business, FedEx Ground Package System, Inc. (" FedEx" ), contracts with drivers to deliver packages to its customers. The drivers must wear FedEx uniforms, drive FedEx-approved vehicles, and groom themselves according to FedEx's appearance standards. FedEx tells its drivers what packages to deliver, on what days, and at what times. Although drivers may operate multiple delivery routes and hire third parties to help perform their work, they may do so only with FedEx's consent.

FedEx contends its drivers are independent contractors under California law. Plaintiffs, a class of FedEx drivers in California, contend they are employees. We agree with plaintiffs.

I. Background

A. Factual Background

Named plaintiffs represent a class comprising approximately 2300 individuals who were full-time delivery drivers for FedEx in California between 2000 and 2007. Plaintiff class members worked for FedEx's two operating divisions, FedEx Ground and FedEx Home Delivery. FedEx Ground deals primarily with business-to-business deliveries, while FedEx Home Delivery deals primarily with residential deliveries. The differences between the two divisions do not matter to this appeal.

FedEx characterizes its drivers as independent contractors. FedEx's Operating Agreement (" OA" ) governs its relationship with the drivers. The OA's " Background Statement" provides:

[T]his Agreement will set forth the mutual business objectives of the two parties ... but the manner and means of reaching these results are within the discretion of the [driver], and no officer or employee of FedEx ... shall have the authority to impose any term or condition on [the driver] ... which is contrary to this understanding.

A provision of the OA titled " Discretion of Contractor to Determine Method and Means of Meeting Business Objectives," states:

[N]o officer, agent or employee of FedEx ... shall have the authority to direct [the driver] as to the manner or means employed ... . For example, no officer, agent or employee of FedEx ... shall have the authority to prescribe hours of work, whether or when the [driver] is to take breaks, what route the [driver] is to follow, or other details of performance.

FedEx's relationship with its drivers also is governed by various policies and procedures prescribed by FedEx.

1. Job Requirements

The OA requires FedEx drivers to pick up and deliver packages within their assigned " Primary Service Area[s]." Drivers must deliver packages every day that FedEx is open for business, and must deliver every package they are assigned each day. They must deliver each package within a specific window of time negotiated between FedEx and its customers. After each delivery, drivers must use an electronic scanner to send data about the delivery to FedEx. FedEx does not require drivers to follow specific delivery

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routes. However, FedEx tells its managers to design and recommend to its drivers routes that will " reduce travel time" and " minimize expenses and maximize earnings and service."

FedEx does not expressly dictate working hours, but it structures drivers' workloads to ensure that they work between 9.5 and 11 hours every working day. If a driver's manager determines that the driver has more work than he or she " can reasonably be expected to handle" in a 9.5 to 11-hour day, the manager may reassign part of the driver's workload to other drivers. Drivers are compensated according to a somewhat complex formula that includes per-day and per-stop components. Drivers are expected to arrive at their delivery terminals each morning, and they are not supposed to leave the terminal until all of their packages are available for pick-up. FedEx instructs managers to make sure that drivers properly fill out their paperwork and prepare their packages for delivery. Each terminal sets a time by which all drivers must return at the end of the day. If drivers want their trucks loaded by FedEx's package-handlers, they must leave their trucks at the terminal overnight.

The OA gives FedEx the authority to " reconfigure" a driver's service area upon five days' written notice. Drivers have the right to propose a plan to avoid reconfiguration, " using means satisfactory to FedEx." FedEx " may, in its sole discretion," reject a plan that does not " provide reasonable means to continue" the driver's service area. Should a driver's service area be reconfigured in such a way that the driver gains customers, FedEx may reduce that driver's pay to compensate other drivers who lost customers in the reconfiguration.

FedEx trains its drivers on how best to perform their job and to interact with customers. The OA provides that, during the first 30 days of the contract term, FedEx " shall ... familiarize [drivers] with various quality service procedures developed by FedEx." The OA requires drivers to conduct themselves " with integrity and honesty, in a professional manner, and with proper decorum at all times." They must " [f]oster the professional image and good reputation of FedEx."

A driver's managers may conduct up to four ride-along performance evaluations each year, " to verify that [the driver] is meeting the standards of customer service" required by the OA. Managers are supposed to observe and record small details about each step of a delivery, including whether a driver uses a " dolly or cart" to move packages, demonstrates a " sense of urgency," and " [p]laces [his or her] keys on [the] pinky finger of [his or her] non-writing hand" after locking the delivery vehicle. After finishing a ride-along evaluation, managers are supposed to give immediate feedback to drivers about the quality of their work. FedEx contends in this litigation that this feedback constitutes mere recommendations that drivers are free either to follow or disregard.

Drivers must follow FedEx's " Safe Driving Standards." These standards prohibit many illegal acts, such as " [d]riving while under the influence of alcohol or drugs" and " [u]sing a motor vehicle in the commission of a felony." They also forbid some legal conduct, including " [d]riving a motor vehicle in a speed exhibition, contest or drag race" and " [c]arrying passengers not authorized by FedEx."

The OA allows drivers to operate more than one vehicle and route, but only " with the consent of FedEx" and only if " consistent with the capacity of the [driver's] terminal." Drivers may also hire third parties to help perform their work. Third-party helpers must be " qualified pursuant

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to applicable federal, state and municipal safety standards and [FedEx's] Safe Driving Standards." They must be " fully trained" and must " conform fully" with the OA. Drivers " in good standing" under the OA may assign their rights and obligations to replacement drivers, but any such replacement must be " acceptable to FedEx."

Drivers enter into the OA for an initial term of one, two, or three years. At the end of the initial term, the OA provides for automatic renewal for successive one-year terms if neither party provides notice of their intent not to renew. The OA may be terminated (1) by the parties' mutual agreement; (2) for cause, including a breach of any provision of the OA; (3) if FedEx stops doing business or reduces operations in all or part of the driver's service area; or (4) upon thirty days' written notice by the driver. The OA requires drivers to submit claims for wrongful termination to arbitration.

2. Equipment and Appearance Requirements

FedEx requires its drivers to provide their own vehicles. Vehicles must not only meet " all applicable federal, state and municipal laws and regulations," but also must be specifically approved by FedEx. The OA allows FedEx to dictate the " identifying colors, logos, numbers, marks and insignia" of the vehicles. All vehicles must be painted " FedEx white," a specific shade of Sherwin-Williams paint, or its equivalent. They must be marked with the FedEx logo, and " maintained in a clean and presentable fashion free of body damage and extraneous markings." FedEx requires vehicles to have specific dimensions, and all vehicles must also contain shelves with specific dimensions. FedEx requires that a " typical package van" have

two [shelves] per side, full length of the body. They should be 24: (-1" , " ) deep with a 1" to 2" pitch and a front lip not to exceed 2" height. Top shelf to bottom of roof or roof bow should be 24" minimum. The lower shelf lip to the bottom of the top shelf should be 24" ( 3/4" ). Aluminum is the preferred material, ...

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