FedEx has long classified its ground delivery drivers as independent contractors, but on Wednesday, a federal court of appeals panel ruled that approximately 2,300 FedEx drivers in California are employees as a matter of law.  As a result, FedEx may owe these drivers hundreds of millions of dollars, and the ruling could have a ripple effect on class actions brought by drivers of companies such as Uber and Lyft.

A three-judge panel of the Ninth Circuit Court of Appeals reversed an order granting a motion for summary judgment in favor of FedEx Ground Package System, Inc. and ruled that the plaintiff FedEx drivers were employees under California's right-to-control test (the Court's opinion can be found by clicking here).

The Court noted that although FedEx characterizes the plaintiffs as independent contractors in its written Operating Agreement between the company and its drivers, FedEx still controls numerous aspects of the drivers' employment, including the uniforms that they wear, the vehicles that they may drive, the appearance of those vehicles, and the grooming and appearance standards for the drivers.  The Court also noted that while drivers maintain some choice over the hours they work, FedEx "structures drivers’ workloads to ensure that they work between 9.5 and 11 hours every working day" and further dictates what packages must be delivered and the times on which they are delivered.

The Court ruled that the Operating Agreement's label of independent contractors was not decisive, and quoted Abraham Lincoln, who reportedly said "Calling a dog’s tail a leg does not make it a leg."

FedEx will appeal the ruling, but if it is upheld, it could prove costly for the company.  In addition to unraveling its business model, the plaintiff drivers allege that FedEx owes them millions of dollars for illegally shifted costs to them for FedEx branded trucks and materials (such as uniforms), as well as back pay for missed meal- and rest-periods, overtime compensation, and penalties. 

And the ruling could impact other class actions across the country, including litigation brought by drivers of companies such as Lyft and Uber, which also classify their drivers as independent contractors.  One such lawsuit, filed in Massachusetts state court, claims Uber misclassifies its drivers as independent contractors to avoid paying benefits and to pass costs along to the drivers (the Massachusetts suit also claims that Uber wrongfully withholds portions of gratuities, in violation of Massachusetts state law).  Drivers for the ride-share companies have also filed suits in the Northern District of California.

Attorneys for the plaintiff drivers of Lyft and Uber have already publicly latched onto the decision and point to it as support for their claims.  At first glance, however, it appears Uber and Lyft would be in a better position under the California right-to-control test, as those companies do not exert the same level of control over drivers' uniforms, vehicles, or hours.