335 P.3d 66 (Kan. 2014), 108,526, Craig v. FedEx Ground Package Sys., Inc.

Docket Nº:108,526
Citation:335 P.3d 66, 300 Kan. 788
Opinion Judge:Per Curiam
Party Name:CARLENE M. CRAIG, LEO RITTENHOUSE, JEFF BRAMLAGE, LAWRENCE LIABLE, and KENT WHISTLER, Appellants, v. FEDEX GROUND PACKAGE SYSTEM, INCORPORATED, Appellee
Attorney:Steve Six, of Stueve Siegel Hanson LLP, of Kansas City, Missouri, argued the cause, and Beth A. Ross and Sandy N. Nathan, of Leonard Carder, LLP, of Oakland, California, Robert I. Harwood and Matthew M. Houston, of Harwood Feffer, LLP, of New York, New York, Susan E. Ellingstad, of Lockridge Grin...
Judge Panel:MORITZ, J., not participating. DANIEL D. CREITZ, District Judge, assigned. Moritz, J.,
Case Date:October 03, 2014
Court:Supreme Court of Kansas

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335 P.3d 66 (Kan. 2014)

300 Kan. 788

CARLENE M. CRAIG, LEO RITTENHOUSE, JEFF BRAMLAGE, LAWRENCE LIABLE, and KENT WHISTLER, Appellants,

v.

FEDEX GROUND PACKAGE SYSTEM, INCORPORATED, Appellee

No. 108,526

Supreme Court of Kansas

October 3, 2014

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On certification of two questions of law from the United States Court of Appeals for the Seventh Circuit, FRANK H. EASTERBROOK, certifying judge.

The questions certified are determined.

SYLLABUS

On certified question from the United States Court of Appeals for the Seventh Circuit, this court answers: Given the undisputed facts presented to the district court in this case, the plaintiff drivers are employees of FedEx Ground Package System, Inc. as a matter of law under the Kansas Wage Payment Act, K.S.A. 44-313 et seq., and a plaintiff driver does not lose his or her employee status by acquiring another route for which that plaintiff is not the driver.

Steve Six, of Stueve Siegel Hanson LLP, of Kansas City, Missouri, argued the cause, and Beth A. Ross and Sandy N. Nathan, of Leonard Carder, LLP, of Oakland, California, Robert I. Harwood and Matthew M. Houston, of Harwood Feffer, LLP, of New York, New York, Susan E. Ellingstad, of Lockridge Grindal Nauen P.L.L.P., of Minneapolis, Minnesota, and George A. Barton and Stacy A. Burrows, of The Law Offices of George A. Barton, P.C., of Kansas City, Missouri, were with him on the briefs for appellants.

James D. Oliver, of Foulston Siefkin LLP, of Overland Park, argued the cause, and Jonathan D. Hacker, of O'Melveny & Myers LLP, of Washington, D.C., Robert M. Schwartz, of O'Melveny & Myers LLP, of Los Angeles, California, and J. Timothy Eaton, of Shefsky & Froelich Ltd., of Chicago, Illinois, were with him on the brief for appellee.

Greg L. Musil and Amy E. Morgan, of Polsinelli PC, of Overland Park, James C. Sullivan, of Kansas City, Missouri, and Richard Pianka, of ATA Litigation Center, of Arlington, Virginia, were on the brief for amici curiae American Trucking Associations, Inc. and Kansas Motor Carrier Association.

Justin McFarland, deputy general counsel, of Kansas Department of Labor, was on the brief for amicus curiae Lana Gordon, State of Kansas Secretary of Labor.

MORITZ, J., not participating. DANIEL D. CREITZ, District Judge, assigned. 1

OPINION

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Per Curiam

The United States Court of Appeals for the Seventh Circuit requests our answers to two certified questions regarding [300 Kan. 789] the proper classification of FedEx Ground Package System, Inc. (FedEx) delivery drivers under the provisions of the Kansas Wage Payment Act (KWPA), K.S.A. 44-313 et seq. Specifically, the Seventh Circuit inquires:

" 1. Given the undisputed facts presented to the district court in this case, are the plaintiff drivers employees of FedEx as a matter of law under the KWPA?

" 2. Drivers can acquire more than one service area from FedEx. . . . Is the answer to the preceding question different for plaintiff drivers who have more than one service area?" Craig v. FedEx Ground Package System, Inc., 686 F.3d 423, 431 (7th Cir. 2012).

We answer yes to the first certified question. As applied to those drivers who are members of the certified class, i.e., those drivers who " 'drive a vehicle on a full-time basis,'" we answer no to the second question, i.e., the answer to the first question remains the same. See 686 F.3d at 425, n.1.

Facts and Procedural Overview

This case began as numerous class actions filed throughout the country against FedEx by current and former drivers for the company. The plaintiff drivers allege they are employees, rather than independent contractors, under both state and federal law. The Judicial Panel on Multidistrict Litigation consolidated the class actions, transferred the consolidated action to the United States District Court for the Northern District of Indiana (District Court), and designated the Kansas class action as the lead case.

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The District Court certified a nationwide class seeking relief under the Employee Retirement Income Security Act (ERISA) and certified statewide classes under Federal Rule of Civil Procedure 23(b)(3). Craig, 686 F.3d at 425. There are 479 Kansas class plaintiffs who allege that they were improperly classified as independent contractors under the KWPA. They seek repayment of all costs and expenses that they expended on behalf of FedEx during their time as FedEx drivers, and they claim entitlement to unpaid overtime wages. The Kansas class is defined as follows:

" 'All persons who: 1) entered or will enter into a FXG Ground or FXG Home Delivery form Operating Agreement . . . ; 2) drove or will drive a vehicle on a full-time basis (meaning exclusive of time off for commonly excused employment [300 Kan. 790] absences) from February 11, 1998, through October 15, 2007, to provide package pick-up and delivery services pursuant to the Operating Agreement; and 3) were dispatched out of a terminal in the state of Kansas.' [Citation omitted.]" Craig, 686 F.3d at 425, n.1.

Pursuant to this class definition, plaintiffs must be full-time drivers. Accordingly, we will also refer to plaintiffs as " drivers."

All parties filed cross-motions for summary judgment on a stipulated record that included a form Operating Agreement (OA) entered into between FedEx and the drivers, as well as evidence relating to certain FedEx work practices. The District Court determined that the Kansas class plaintiffs were independent contractors under the KWPA. Consequently, the court granted summary judgment to FedEx and denied the Kansas class plaintiffs' summary judgment motion. 686 F.3d at 425. Subsequently, the District Court relied on its decision in the Kansas Craig case to enter summary judgment in favor of FedEx on the respective plaintiffs' employment status challenges in all the other statewide class actions. See In re FedEx Ground Package System, Inc., 758 F.Supp.2d 638 (N.D. Ind. 2010).

All state class plaintiffs appealed, presenting substantially the same issue: Whether the district court erred by deciding, as a matter of law, that plaintiffs were independent contractors, rather than employees, under each respective state's substantive law. The Seventh Circuit chose to proceed with review of the Craig appeal while suspending briefing in the remaining appeals.

The Seventh Circuit began its analysis by noting that under Kansas law the " 'right of control' test is the most important consideration in determining whether an employment relationship exists, but it is not the only one." Craig, 686 F.3d at 427. Ultimately, the Seventh Circuit opined that our Kansas cases addressing the right to control test did not clearly indicate to the Seventh Circuit how it should decide a close case, such as the one presented by the facts of this case. The Seventh Circuit explained its need to propound certified questions to this court as follows:

" Where some of the factors weigh in favor of finding employee status, some weigh in favor of independent contractor status, and some 'cut both ways,' a court must weigh the factors according to some legal principle or principles. But other than [300 Kan. 791] the point that the right of control is the primary factor, what is the underlying principle (or principles) that guides that weighing process in close cases such as this seeking to establish an employment relationship under the KWPA? We are unsure." 686 F.3d at 428.

A lengthy recitation of the uncontroverted facts relied upon by the federal courts is set forth in the District Court's opinion. In re FedEx Ground Package System, Inc., 734 F.Supp.2d 557, 560-75 (N.D. 2010). Although we have carefully reviewed all of the recited facts, we will not repeat the entire recitation here but rather we will refer to the relevant facts as they become germane to our discussion.

Fedex Delivery Drivers' Status under the KWPA

The simple question is whether FedEx's delivery drivers are employees for purposes of the KWPA. The answer defies such simplicity. As FedEx's counsel acknowledged at oral argument, the company carefully structured its drivers' operating agreements so

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that it could label the drivers as independent contractors in order to gain a competitive advantage, i.e., to avoid the additional costs associated with employees. In other words, this is a close case by design, not happenstance. Notwithstanding the form or labels utilized, we must determine whether the substance of the relationship between FedEx and its delivery drivers renders the drivers employees within the meaning of the KWPA. Ultimately, we determine that form does not trump the substantive indicia of an employer/employee relationship.

Authority/Standard of Review

K.S.A. 60-3201, entitled " Power to answer," provides us with the authority to respond to the Seventh Circuit's request. That statute provides, in relevant part:

" The Kansas supreme court may answer questions of law certified to it by . . . a court of appeals of the United States, . . . when requested by the certifying court if there are involved in any proceeding before it questions of law of this state which may be determinative of the cause then pending in the certifying court and as to which it appears to the certifying court there is no controlling precedent in the decisions of the supreme court and the court of appeals of this state." K.S.A. 60-3201.

[300 Kan. 792] By statutory definition, certified questions present questions of law, and we exercise unlimited review over such questions. See Nationwide Mutual Ins. Co. v. Briggs, 298 Kan. 873, 875, 317 P.3d 770 (2014); Eastman v. Coffeyville Resources Refining & Marketing, 295 Kan. 470, 473, 284 P.3d 1049 (2012).

Moreover, with these particular certified questions, we must interpret and apply the KWPA,...

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