Craig v. Fedex Ground Package Sys., Inc.

• Decision Date: 12 July 2012
• Docket Number: No. 10–3115.,10–3115.
• Citation: 19 Wage & Hour Cas.2d (BNA) 544,686 F.3d 423
• Parties: Carlene M. CRAIG, et al., Plaintiffs–Appellants, v. FEDEX GROUND PACKAGE SYSTEM, INC., Defendant–Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

686 F.3d 423

19 Wage & Hour Cas.2d (BNA) 544

Carlene M. CRAIG, et al., Plaintiffs–Appellants,

v.FEDEX GROUND PACKAGE SYSTEM, INC., Defendant–Appellee.

No. 10–3115.

United States Court of Appeals,Seventh Circuit.

Argued Jan. 12, 2012.

Decided July 12, 2012.

Beth A. Ross (argued), Attorney, Leonard Carder, Oakland, CA, for Plaintiffs–Appellants.

J. Timothy Eaton (argued), Attorney, Shefsky & Froeclich, Ltd., Chicago, IL, Jonathan Hacker, Attorney, O'Melveny & Myers LLP, Washington, DC, for Defendant–Appellee.

Before EASTERBROOK, Chief Judge, and ROVNER and TINDER, Circuit Judges.

PER CURIAM.

FedEx Ground (“FedEx”) provides small package pick-up and delivery services through a network of pick-up and delivery drivers. The plaintiffs are current and former drivers for FedEx who allege that they were employees rather than independent contractors under the laws of the states in which they worked and under federal law. The Judicial Panel on Multidistrict Litigation consolidated these actions and transferred them to the District Court for the Northern District of Indiana. That court used the Carlene M. Craig, et al. case, which was based on the Employee Retirement Income Security Act (“ERISA”) and Kansas law, as its “lead” case. The court certified a nationwide class seeking relief under ERISA and certified statewide classes under Federal Rule of Civil Procedure Rule 23(b)(3).¹ The Kansas class has 479 members. They allege that they were improperly classified as independent contractors rather than employees under the Kansas Wage Payment Act (“KWPA” or “Act”), Kan. Stat. Ann. §§ 44–313 et seq., and that as employees, they are entitled to repayment of all costs and expenses they paid during their time as FedEx employees. They also seek payment of overtime wages.

Cross summary judgment motions presented the question of whether the FedEx drivers are employees or independent contractors under the KWPA. The evidence presented through the competing motions essentially comprised a stipulated record revolving around a form Operating Agreement FedEx entered with each of the class members and certain FedEx work practices. FedEx asserted that the undisputed facts before the district court must result in a determination that the drivers are not employees under the KWPA. The drivers contended that the same record required the court to find that they are employees under that Act or, in the alternative, that the undisputed evidence, along with reasonable inferences that could be drawn from it, entitled them to a trial on that question. In a thorough opinion and order, the district court granted FedEx summary judgment and denied the plaintiffs summary judgment, effectively deciding that they could not prevail on their claims. In re FedEx Ground Package Sys., Inc., 734 F.Supp.2d 557 (N.D.Ind.2010). The court then drew on its decision in Craig and ruled in FedEx's favor on summary judgment on the question of the plaintiffs' employment status in the other cases. In re FedEx Ground Package Sys., Inc., Emp't Practices Litig., 758 F.Supp.2d 638 (N.D.Ind.2010). Judgments and amended judgments were entered.

Twenty-one cases are on appeal. They present substantially the same issue: whether the district court erred by deciding as a matter of law that the certified classes of plaintiffs were independent contractorsand thus could not prevail on their claims. Each case, however, arises under a different state's substantive law. The parties proposed that we begin with the Craig appeal and stay the remaining appeals, proceeding as the district court did. We suspended briefing in the other appeals pending further order and now address the Craig appeal. Rather than repeat the district court's detailed explication of the relevant undisputed facts set forth in “Section I. Common Facts Applicable to Right to Control,” of its opinion, see In re FedEx Ground, 734 F.Supp.2d at 560–75, we expressly adopt and incorporate it here.

I.

When sitting in diversity, “our task is to ascertain the substantive content of state law as it either has been determined by the highest court of the state or as it would be by that court if the present case were before it now.” Thomas v. H & R Block E. Enters., 630 F.3d 659, 663 (7th Cir.2011) (quoting Woidtke v. St. Clair Cnty., Ill., 335 F.3d 558, 562 (7th Cir.2003)).

The KWPA requires employers to pay their employees “all wages due.” Kan. Stat. Ann. § 44–314(a). The Act provides an expansive definition of “employee”: “any person allowed or permitted to work by an employer.” Kan. Stat. Ann. § 44–313(b). The Act also defines “employer” broadly as well to include any corporation “employing any person.” Kan. Stat. Ann. § 44–313(a). The Kansas Supreme Court has stated that the statute's definition of “employee” is “virtually identical” to the definition of “employee” in the workers' compensation statute. Coma Corp. v. Kansas Dep't of Labor, 283 Kan. 625, 154 P.3d 1080, 1092 (2007) (comparing definition of “employee” in Kan. Stat. Ann. § 44–313 with definition of “workman,” “employee,” and “worker” in Kan. Stat. Ann. § 44–508(b)). The Kansas secretary of labor is authorized by statute to “enforce and administer ... [the KWPA],” Kan. Stat. Ann. § 44–322(a), and to “adopt such rules and regulations as necessary for the purposes of administering and enforcing the [Act's] provisions,” id. 44–325. There are a few such regulations: the first sets forth the meaning of several definitions used in the KWPA, Kan. Admin. Regs. § 49–20–1; the others establish the procedures for filing, processing, and determining claims, Kan. Admin. Regs. §§ 49–21–1 to –4. Importantly, the regulations provide that “[a]llowed or permitted to work” within § 44–313(b) “shall not include an independent contractor, as defined by rules, regulations, and interpretations of the United States secretary of labor for the purposes of the fair labor standards act.” Kan. Admin. Regs. § 49–20–1(e).

Kansas courts look to the workers' compensation statute when construing the KWPA. See, e.g., Campbell v. Husky Hogs, LLC, 292 Kan. 225, 255 P.3d 1, 6–7 (2011). Kansas courts have defined an independent contractor as “one who, in exercising an independent employment, contracts to do certain work according to his own methods, without being subject to the control of his employer, except as to the results or product of his work.” Falls v. Scott, 249 Kan. 54, 815 P.2d 1104, 1112 (1991). No absolute rule exists for determining whether a worker is an independent contractor or an employee. Hartford Underwriters Ins. Co. v. State, Dep't of Human Res., 272 Kan. 265, 32 P.3d 1146, 1151 (2001). Each case must be decided based on its own facts and circumstances. Id. The primary consideration is the “right of control” test: “whether the employer has the right of control and supervision over the work of the alleged employee, and the right to direct the manner in which the work is to be performed, as well as the result which is to be accomplished.” Falls, 815 P.2d at 1112. The Kansas Supreme Court has said: “It is not the actual interference or exercise of the control by the employer, but the existence of the right or authority to interfere or control, which renders one a servant rather than an independent contractor.” Id.

The “right of control” test is the most important consideration in determining whether an employment relationship exists, but it is not the only one. Courts may consider other factors, including the ones enumerated in the Restatement ( Second ) of Agency § 220(2) (1958). P.S. ex rel. Nelson v. Farm, Inc., 658 F.Supp.2d 1281, 1297 (D.Kan.2009):

(a) the extent of control which, by the agreement, the master may exercise over the details of the work;

(b) whether or not the one employed is engaged in a distinct occupation or business;

(c) the kind of occupation, with reference to whether, in the locality, the work is usually done under the direction of the employer or by a specialist without supervision;

(d) the skill required in the particular occupation;

(e) whether the employer or the workman supplies the instrumentalities, tools, and the place of work for the person doing the work;

(f) the length of time for which the person is employed;

(g) the method of payment, whether by the time or by the job;

(h) whether or not the work is a part of the regular business of the employer;

(i) whether or not the parties believe they are creating the relation of master and servant; and

(j) whether the principal is or is not in business.

Olds–Carter v. Lakeshore Farms, Inc., 45 Kan.App.2d 390, 250 P.3d 825, 834 (2011).²

In looking for guidance on the meaning of the KWPA, we are directed to Kansas cases addressing the employee/independent contractor status of truck drivers. The Kansas Supreme Court has found the existence of the right of control so as to support a finding of employee status in a number of such cases. See Knoble v. Nat'l Carriers, Inc., 212 Kan. 331, 510 P.2d 1274, 1280 (1973) (concluding the company “exercised or had the right to exercise as much control over the drivers ... as it desired”); Anderson v. Kinsley Sand & Gravel, Inc., 221 Kan. 191, 558 P.2d 146, 152 (1976) (concluding there was evidence of an employment relationship where truck driver engaged in “an inherent part of [the company's] business operation,” and the company determined the kind and quantity of material to be loaded into the truck and where each load was to be delivered); Watson v. W.S. Dickey Clay Mfg. Co., 202 Kan. 366, 450 P.2d 10 (1969) (stating that when a trucker reports to the company to deliver its products, he “agrees to submit to the controls that are imposed by [the company]; otherwise he hauls none of [its] products”); Wilbeck v. Grain Belt Transp. Co., 181 Kan. 512, 313 P.2d 725, 726–27 (1957) (holding employment relationship existed where driver hauled freight for company whose business was exclusively the transportation of shipments of freight); Shay v. Hill, 133 Kan. 157, ...