The Internal Revenue Service has reversed a previous decision that FedEx Ground owed $319 million in back taxes for 2002 after an audit found the company had misclassified its independent contractor drivers
. The carrier has been in legal and tax battles for years over whether or not its independent contractors are considered company employees.

The IRS's decision not to assess any tax or penalty with respect to FedEx Ground's independent contractors includes FedEx Home Delivery drivers. The company says the decision validates the company's long-standing position that FedEx Ground contractors are small business owners.

"FedEx Ground's independent contractor model has been tremendously successful for customers, contractors and the company for more than 20 years, and we believe the IRS decision provides further vindication of the model," the company said in a statement.

The company still faces similar issues under audit for 2004 through 2008, but officials expect the IRS to make the same decision regarding independent contractors for these years.

In April 2009, a U.S. Court of Appeals for the D.C. Circuit ruled in favor of FedEx Ground, ruling that its independent contractors are independent business owners -- not employees -- and are outside the jurisdiction of the National Labor Relations Board. This decision was made on a FedEx Ground-filed petition for review following a September 28, 2007, NLRB decision granting the International Brotherhood of Teamsters the ability to conduct a membership election among single work area contractors in FedEx Ground's Home Delivery terminals in Boston and Wilmington, Mass. In the September 2007 decision, the NLRB claimed that the contractors were actually employees, not independent contractors.

Also in April of this year, a jury in the Superior Court of the State of Washington for King County ruled in FedEx's favor on the issue. The case was a class action suit, Anfinson vs. FedEx Ground Package System Inc., which involved a class of 320 single work area contractors in Washington State. These contractors sought damages for non-payment of overtime and reimbursement of uniform expenses.