The big picture: FedEx Ground paid a $240 million settlement in 2016, resolving multi-state lawsuits alleging it misclassified thousands of drivers as independent contractors, denying them employee benefits and overtime. This followed a separate $226 million settlement in California.

Why it matters: This landmark case underscores the significant financial and legal risks associated with misclassifying workers, a critical concern for staffing firms and employers utilizing contingent labor models.

Between the lines:

• Courts found FedEx exerted significant control over drivers (uniforms, vehicles, policies), making them employees under labor laws.
• Misclassification allowed FedEx to avoid payroll taxes, overtime, and providing employee benefits.
• The Ninth Circuit Court of Appeals played a key role in earlier rulings against FedEx's contractor model.

Staffing & HR impact: Staffing firms must rigorously review their contractor engagement models to ensure compliance with evolving labor laws, as misclassification can lead to massive wage and hour liabilities and reputational damage. This directly impacts gross margins and operational risk management.

The bottom line: The 'control test' remains paramount: treat contractors like employees, pay employee costs.