FedEx Ground's Contractor Model Leaves Company Exposed

FedEx Ground's Contractor Model Leaves Company Exposed

Contact: Donna De La Cruz (202) 624-8721Hurts Workers and Bottom Line, Teamsters Warn

December 21, 2007

(Washington, D.C.) - For the first time, FedEx Corporation (NYSE:FDX) has publicly said regulatory and legal challenges to its employment classifications could result in costs detrimental to its stock price. The statement was buried in FedEx’s earnings report released Thursday.

FedEx Corp.’s subsidiary FedEx Ground is the subject of numerous federal agency findings, civil court judgments and state agency rulings that have found its drivers to be legal employees and not independent contractors.

In the company’s report filed to the Securities and Exchange Commission (Form 8-K) on Thursday, it said that FedEx Ground "anticipates continuing changes to its relationships with its contractors, which are expected to increase the cost of operations, and it is reasonably possible that such cost increases could be material."

"FedEx is in a full fighting retreat as it tries to defend its illegal contractor model," said Jim Hoffa, General President of the International Brotherhood of Teamsters. "It’s time the company takes responsibility for its workers and develops a sustainable and legal business strategy."

On Wednesday, the Massachusetts Attorney General cited FedEx Ground for intentionally misclassifying 13 pickup and delivery drivers as independent contractors rather than employees. FedEx was fined $190,000 in penalties and ordered to fix the employment status and pay the 13 drivers restitution. The AG’s investigation in Massachusetts is ongoing.

Recently, the California Supreme Court refused to review a California Court of Appeal ruling that found single route drivers in that state to be misclassified.

In September 2007, FedEx Ground unilaterally terminated contracts for 1,000 drivers in California in the face of repeated court rulings that deemed the FedEx "contractors" to be employees.

The severance or buy-out one-time costs associated with those terminations could be between $25 million and $37 million according to Teamster estimates.

Also in September, FedEx Ground offered new, annual bonuses to multi-vehicle contractors nation wide to increase settlements. In its own analysis, the Teamsters estimated that costs of this "Enhanced Primary Plus" program could be between $15 million and $25 million annually.

For more information, go to http://www.fedexwatch.com.