FedEx Ground and Contract Drivers

FedEx won a major victory last week in its efforts to retain its current operating model at FedEx Ground. The Internal Revenue Service (IRS) dropped its tax assessments related to FedEx Grounds use of contract delivery drivers for the years 2004-2006. This follows a similar IRS decision for 2002. FedEx expects that the remaining assessments that it contests or 2007 and 2008 will be dropped as well.

The action by the IRS should remove any immediate threat at the federal level to FedEx Ground's use of 15,000 contract drivers. The IRS's actions do not affect suits brought by a number of state attorney generals that FedEx Ground's use of contractors violates state labor laws. (For more information see: Labor Problems at FedEx Ground.)

The state actions have potentially wider consequences as most local and regional parcel carriers, express companies, and couriers use a contractor model similar to FedEx. The trade association of these firms, the Messenger Courier Association of America (MCAA) has had the issue of contract drivers as one of their top policy issues for number of years. Their briefing paper details their position on the issue.