May 13, 2008

(Washington, D.C.)—The International Brotherhood of Teamsters on Tuesday blasted FedEx Corporation [NYSE: FDX} subsidiary FedEx Ground for refusing to produce an Internal Revenue Service audit of FedEx Ground’s “contractor” drivers to lawyers representing drivers in a federal class action lawsuit challenging various unfair and unlawful employment practices. 

The IRS audit determined the drivers were wrongly classified as “contractors” and assessed FedEx $319 million in past taxes for 2002 and penalty fees. On May 9, the drivers’ lawyers in an unrelated class action lawsuit that challenges, among other things, FedEx’s violation of wage and hour laws with respect to its so-called “contractors,” filed a motion in the U.S. District Court for Northern Indiana to gain access to the IRS audit notification. The motion was filed after negotiations between FedEx and the drivers’ lawyers for an agreement under which the document would have been produced voluntarily failed. 

“FedEx continues to avoid the reality that their illegal classification scheme doesn’t pass the legal tests under federal labor law or federal tax law,” said Teamsters General President Jim Hoffa. “Now FedEx is literally trying to hide evidence of an IRS audit from the courts and the drivers in their civil claims against the company.”

“FedEx thought the IRS audit was important enough to inform their shareholders about, but doesn’t feel the IRS audit is important enough for the district court case,” Hoffa added. “FedEx needs to face facts and comply with the law by properly treating these drivers as employees.”

FedEx Corporation previously disclosed the existence of the IRS audit in earlier Securities and Exchange Commission filings. In FedEx’s March 20 Form 10-Q, the company said the IRS has tentatively concluded that FedEx Ground’s pick-up-and-delivery owner-operators should be reclassified as employees for federal employment tax purposes.

“The IRS has indicated that it anticipates assessing tax and penalties of $319 million plus interest for 2002,” FedEx said in the form. “Substantially all of the IRS’s tentative assessment relates to employment and withholding taxes for the 2002 calendar year and, if paid by the company, would be fully deductible. Similar issues are under audit by the IRS for calendar years 2004 through 2006.”

FedEx is in litigation with the National Labor Relations Board over a board determination that these same drivers are employees under federal labor law. Teamsters Local 25 won two elections at FedEx Home Delivery in Massachusetts in 2006. FedEx has refused to bargain a contract for these Massachusetts employees. FedEx filed an administrative review in the U.S. Circuit Court for District of Columbia that challenged the NLRB determination.

Although not determinative in other litigation, the IRS audit conclusions support the plaintiffs’ claims in the class action case, as well as those other misclassification cases involving FedEx Ground.

For more information, see the International Brotherhood of Teamsters www.fedexwatch.com web site.

Founded in 1903, the International Brotherhood of Teamsters represents 1.4 million hardworking men and women in the United States, Canada and Puerto Rico.