FedEx settles over worker misclassification
Massachusetts' Attorney General said Thursday it has entered into a multimillion-dollar agreement with FedEx Ground to settle claims the company misclassified its drivers as independent contractors.
FedEx Ground agreed to pay more than $3 million back to the commonwealth's general fund, but the state noted that FedEx Ground denies liability in the settlement.
The Attorney General's office alleged FedEx Ground's failure to properly classify drivers led it to make lesser payments to the commonwealth for payroll taxes, worker's compensation and unemployment assistance.
'We have made enforcement against employer misclassification a priority because employers who misclassify workers are gaining an unfair advantage over their competitors and unfairly depriving the commonwealth of tax and other revenues,” said Attorney General Martha Coakley.
In 2007, Coakley's office cited FedEx Ground for violation of the Independent Contractor Law, by misclassifying its drivers, failing to provide a proper pay stub, failing to provide workers' compensation, not paying overtime to certain drivers, and neglecting to deduct and withhold state income taxes. The citations against FedEx Ground included penalties of more than $190,000.
As FedEx Ground appealed the matter, the state conducted further investigation of the company’s business practices and said if found the misclassification resulted in underpayments to the Department of Revenue, Division of Industrial Accidents and Department of Unemployment Assistance.
The settlement amount includes these underpayments. The settlement also provides for a payment for the 13 drivers named in the Attorney General's citation.
FedEx Ground drivers in Massachusetts have brought their own lawsuit against FedEx Ground that remains pending and is not affected by this settlement.