New Mexico court rejects FedEx Ground drivers’ wage suit

In a class action lawsuit, a New Mexico federal district court judge ruled that FedEx Ground drivers are not eligible for overtime pay, despite being considered employees and not independent contractors in numerous other similar cases across the country.

On Aug. 6, Senior U.S. District Judge Robert Brack ruled that provisions of the New Mexico Minimum Wage Act do not apply to FedEx Ground drivers. Judge Brack explained that since the plaintiff and others similarly situated were compensated on a piecework basis the MWA’s exclusion of those “compensated upon piecework, flat rate schedules or commission basis” applies to them.

The ruling comes after FedEx Ground driver Jaime Armijo filed a class action lawsuit against the company in April 2017. According to the lawsuit, drivers did not receive overtime pay for working more than 40 hours a week. Plaintiffs claim they are due those overtime wages.

Employee vs. independent contractor.

Typical of most wage lawsuits involving truck drivers, there is a question of employment status. The complaint states numerous reasons why New Mexico FedEx Ground drivers are employees under state wage laws.

First, FedEx Ground controls the terms and conditions of the drivers’ employment. FedEx-employed managers oversee the drivers, and evaluate their job performance and may refuse to let them work. All new hires must sign a standard agreement.

“Though the contract purports to grant drivers some discretion, a closer look at the contract negates the notion that the drivers have any room for discretion in the manner and means of performing their jobs,” the lawsuit states.

FedEx directions include delivery days/time, delivery methods, reporting requirements and vehicle identification/specifications/appearance. FedEx even dictates the color of the drivers’ socks and style of their hair.

Drivers have to go through FedEx manuals, handbooks, memoranda and training videos. These resemble an employee relationship, not that of an independent contractor, the lawsuit argues.

Even a driver’s truck is under the scrutiny of FedEx. Each vehicle must be “FedEx White” and include FedEx Ground’s logos and advertising. Vehicles must also meet FedEx Ground’s minimum specifications for height, width, length, bumper height and interior shelving requirements.

Most of all, drivers cannot control their own profit or loss. FedEx Ground “unilaterally determines the amount that the drivers are paid for each delivery, which is essentially a piece rate for each job performed but has some variable components determined by FedEx Ground,” according to the lawsuit.

“As the District of Kansas has explained, FedEx Ground ‘carefully structured its drivers’ operating agreements so that it could label the drivers as independent contractors … to avoid the additional costs associated with employees,’” the complaint states. “In other words, the question is close ‘by design.’”

New Mexico’s overtime law

The first count alleged in the lawsuit is violation of New Mexico’s overtime law. Like most states, New Mexico’s law entitles employees time-and-a-half pay for hours worked above 40 in a week.

According to the lawsuit, Armijo worked 60 hours a week or more for most her time at FedEx Ground. Exceptions to overtime protections do not apply to the drivers, plaintiffs claim.

Unauthorized deductions

Plaintiffs also claim FedEx Ground deducted wages that it was not authorized to take.

The complaint alleges that drivers are susceptible to deductions from FedEx Ground’s Business Support Package/Contractor Assistance Program, including marketing, uniforms, scanners, shipping documentation and DOT inspections.

“By taking deductions from its drivers every week, FedEx Ground violates this statute with every check to Ground drivers for their work performed,” the lawsuit claims.

FedEx Ground drivers not employees by New Mexico law

In the original complaint, Armijo points out that FedEx Ground “has fought – and largely lost – a 15-year-plus battle with its drivers over their correct classification as employees or independent contractors.” She also notes that over the past five years, employment status for FedEx Ground drivers “has been consistently rejected by various courts.”

Not in New Mexico.

FedEx argues that Armijo was paid per package and per stop, not by the hour. Consequently, she is not an employee under New Mexico’s Minimum Wage Act “piecework” exception.

The court’s opinion includes more details of Armijo’s role as a driver. First, FedEx only contracted with incorporated businesses, not individual drivers. These entities are contract service providers or CSPs, who enter into operating agreements. That agreement states that all individuals who drive for a CSP must be employees of that CSP.

Armijo signed that agreement on behalf of the CSP, Jaimes Elegant P&D Corp., which she solely owned.

During her three-year contract, Armijo hired five other drivers for her designated route. She can compensate those employees however she wants, per the operating agreement.

Jaimes Elegant’s weekly compensation settlements were based on:

• Number of stops and packages delivered.
• Numbers of miles driven (if more than 200 in a given day).
• Fuel settlements based on fuel price changes in the service area.
• A weekly “core zone” subsidy providing an additional stipend based on the number of stops made and the customer density of the route.
• Mileage and fuel settlements for longer distance “linehaul” work.
• Weekly “flex program” payments, which included a base weekly payment for participation in the program and a per-package payment for any “flexed” packages that drivers picked up or delivered outside Jaimes Elegant’s service area.

Both FedEx Ground and Armijo agreed on four requirements outside the delivery requirements, including mandatory quarterly meetings, mandatory waiting at terminals, designated windows of time for deliveries and pickups, and completion of various administrative tasks when returning to the terminal each day.

In January, FedEx Ground motioned to have the case dismissed based on the fact Armijo worked on a piecework basis, excluding her from all relevant claims.

Armijo argues for a narrower interpretation of the term “piecework” in the suit. She claims that the compensation system within the operating agreement does not qualify as piecework. Even if it did, it is removed from that definition by the additional requirements FedEx imposes on CSPs.

Precedent has defined “piecework” as “payments made ‘per unit’ and tethered to a specific job or item, as opposed to payments tethered to hours spent working,” according to the court.

“The court will not muddy its holding by undertaking a full analysis of the terms ‘flat rate’ and ‘commission,’ but simply points out the obvious—the weekly payments FedEx made to Jaimes Elegant were not based on hours worked,” the court opined. “And Ms. Armijo has presented no argument as to how they should be classified beyond her broad assertion that the piecework exemption does not apply and ‘drivers were paid on a mixed-status basis.’”

Regarding unproductive waiting time that should nullify the piecework exemption, the court sided with FedEx Ground. Although it is true excessive waiting time can cancel out the exception, Armijo’s situation does not apply.

Armijo claims that drivers waited for work. However, she provides no estimate or evidence of exactly how many hours a week drivers waste on unproductive tasks. Giving her the benefit of the doubt, the court estimated seven hours of lost time a week. More specifically, it was 30 minutes a day waiting to leave the terminal and 30 minutes a day completing post-route administrative work.

Even then, the amount of unproductive time is insignificant. Case law concludes that employees who accrue 10-20 hours a week of unproductive work time are still exempt for overtime under the piecework exemption. Therefore, Armijo’s seven hours would certainly not qualify as well.

Furthermore, the court estimated that at minimum wage, Armijo’s lost time would have totaled to $52.50 per week. With one weekly earning at $2,277.93, the lost time wages would comprise less than 3% of all her wages.

“The Court is sympathetic to the fact that Ms. Armijo worked long hours as a FedEx driver and that many courts across the country have found FedEx drivers in similar situations to be ‘employees’ as a matter of law,” Judge Brack concluded. “New Mexico, however, has a uniquely broad statutory exemption in the MWA that excludes all workers who earn their income on a piecework basis from state overtime protections. Rather than simply mirroring the (Fair Labor Standards Act’s) exemption for commission pay, ‘the New Mexico Legislature instead chose to enact an exemption broader than the FLSA’s’ when it chose to exempt workers compensated under commission, flat rate, and piecework structures from the MWA.”

The court granted FedEx its summary judgment. Armijo can still appeal the decision.