Pittsburgh-based FedEx Ground has agreed to pay over $3 million to the Massachusetts attorney general's office in a settlement over the company's misclassification of drivers as independent contractors.


The attorney general's office alleged that FedEx Ground's failure to properly classify drivers had led the company to make lesser payments to the state for payroll taxes, worker's compensation and unemployment assistance.

"We have made enforcement against employer misclassification a priority because employers who misclassify workers are gaining an unfair advantage over their competitors and unfairly depriving the commonwealth of tax and other revenues," said Attorney General Martha Coakley. "With today's agreement, we have recovered $3 million owed to taxpayers and taken a step to level the playing field for businesses."

In 2007, the office cited FedEx Ground for violation of the Independent Contractor Law, by misclassifying its drivers, failing to provide a proper paystub, failing to provide workers' compensation, not paying overtime to certain drivers, and neglecting to deduct and withhold state income taxes. FedEx Ground appealed the matter to the Division of Administrative Law Appeals (DALA). The Attorney General's Office citations against FedEx Ground included penalties of more than $190,000.

While FedEx Ground's appeal was pending before DALA, the attorney general's office coordinated further investigation with the Executive Office of Labor and Workforce Development and the Department of Revenue into the company's business practices. The joint investigation revealed that FedEx Ground's misclassification of employees had resulted in significant underpayments to the Department of Revenue, Division of Industrial Accidents and Department of Unemployment Assistance.

The settlement amount includes these significant underpayments.