FEDEX Corporation's trucking segment, FedEx Ground, has reached a tentative US$228 million settlement with drivers of the company in California who were classified as independent contractors instead of being employees of the firm in the seven years up to 2007.
The settlement agreement is still subject to approval by the United States District Court for the Northern District of California, American Shipper reported.
FedEx vice president Christine Richards said the settlement "resolves claims dating back to 2000 that concern a model FedEx Ground no longer operates".
As a result of the agreement in principle, the company said it took a $197 million pretax charge in its fiscal 2015 fourth quarter, which ended last month, to account for the expense.
Investment advisor William Blair said in an equity research report that due to the fact FedEx no longer operates the independent contractor model, "we do not believe there is a significant risk of this settlement spilling over into other states; however, litigation is admittedly not our expertise and can be difficult to predict".
Mr Blair estimates the company's revenues will increase three per cent to $12.2 billion in the fiscal fourth quarter of 2015. For the full fiscal 2015 year, the investment firm projects revenues will rise four per cent to $47.6 billion.
Source : HKSG.