Three Michigan delivery couriers claim Velocity Express Corp. is shortchanging its drivers by classifying them as independent contractors, forcing them to pay expenses the Westport company should foot itself because it largely controls their schedules and routes.
Mark Day, Aaron Grider and Darin Lipscomb, who all worked two years or less for the company, are seeking class-action status for their suit, demanding reimbursement of all “overhead” charges drivers have incurred working for Velocity Express, as well as an unspecified amount of damages.
At last count, the company employed 4,760 independent contractors as drivers. Following staff reductions totaling 200 jobs in the fiscal year ending last July, the company indicated it experienced higher-than-expected “voluntary attrition” among its employees in its fiscal first quarter, without providing specifics.
Velocity Express requires that drivers pay for their own delivery vehicles as well as repairs, fuel and insurance, the men said, adding that by classifying them as contractors, the company does not have to pay overtime; unemployment and workers”™ compensation insurance; or make Federal Insurance Compensation Act (FICA) contributions.
The company also does not extend health insurance or retirement plans to the contractors.
Velocity Express pays its drivers between 55 percent and 60 percent of the net revenue the company records from a delivery job, the plaintiffs said.
In its fiscal first quarter ending September 29, 2007, the company had an $8 million loss on $93 million in revenue, with sales down 16 percent from the same period in 2006.
Velocity Express is largely controlled by Boston-based TH Lee Putnam Ventures, which holds 45 percent of its stock. The company”™s largest local shareholder is Westport-based Pequot Capital.
The plaintiffs are suing for breach of contract; enforcement of the Employee Retirement Income Security Act; and violations of the Family Medical Leave Act and the Connecticut Minimum Wage Act.
It is the second such case Velocity Express is currently fighting, inheriting the other in its $61 million acquisition last year of New Jersey-based CD&L Inc., which had been sued by California drivers it had employed on a contractor basis.
In 2000, a Velocity Express predecessor company settled a third such case, with the plaintiff”™s attorney saying the settlement amounted to $10 million.
Ted Stone, spokesman and chief financial officer of Velocity Express, did not respond to requests for comment, and the company has yet to file a formal response in Connecticut federal court.
A suit against FedEx Ground Package System Inc., however, might provide a clue as to what line of defense the company might follow should the case progress to trial. Last spring, two FedEx Ground drivers in Connecticut sued that company on similar grounds; after FedEx issued blanket denials of any wrongdoing, the case was transferred to federal court in Indiana.
Among other issues, FedEx Ground drivers argue the company should be held to an “economic reality test” that takes into account FedEx Ground supervisor”™s control of their schedules, and the assertion that drivers are unable to carry out independent deliveries because their trucks are splashed with the FedEx logo.
FedEx Ground adopts the simplest of defenses: drivers sign a contract at the outset that fully describes the agreement between the parties ”“ and a contract is a contract.
“Those terms speak for themselves,” FedEx Ground stated in court papers last month
