Ground War Drivers Deliver Trouble to FedEx By Seeking Employee Benefits Some 'Contractors' Contend Company Calls All Shots; IRS Examines Complaints Chief Says 99% Like System By MONICA LANGLEY Staff Reporter of THE WALL STREET JOURNAL January 7, 2005; Page A1 MADISON, Tenn. -- As a driver for FedEx Corp.'s ground division, Brion Butterbaugh must wear a full FedEx uniform, observe a long list of delivery and pick-up times and hook his truck keys on the finger FedEx tells him to when walking to doors to deliver packages (the little finger of the nonwriting hand). Mr. Butterbaugh, 41 years old, isn't a FedEx employee. He's one of 13,500 "contract" drivers for FedEx Ground who operate their own trucks and pay for their gas and other expenses. The company says these drivers are "independent" and has advertised that becoming a contractor is a way to "be your own boss." But some contractors have set off a high-stakes battle with FedEx by contending the company calls all the shots in their operations. They say rules such as the little-finger requirement show they're essentially employees of FedEx, with all of the risks and none of the benefits, such as health insurance and a retirement plan. Last July, FedEx Ground drivers who had filed a class-action lawsuit against the company won a victory when a California state court ruled that they are employees because of FedEx's "close to absolute actual control" over drivers. In recent months, officials in Montana and New Jersey likewise determined that certain FedEx Ground drivers in those states are employees. FedEx is appealing all the judgments, and FedEx Ground Chief Executive Daniel J. Sullivan says he's confident the company will prevail. The Internal Revenue Service is also investigating FedEx's driver classification, prompted by driver complaints, according to people familiar with the situation. The tax agency will examine whether FedEx has "pushed the envelope of control so far" that it's no longer in compliance with an earlier agreement under which its predecessor company was permitted to count drivers as independent contractors, according to one knowledgeable person. An IRS spokesman declined to comment. FedEx isn't aware of any IRS probe, Mr. Sullivan said.