From Hierarchies to Markets: FedEx Drivers and the Work Contract as Institutional Marker

Judges are often called upon today to determine whether certain workers are “employees” or “independent contractors.” The distinction is important, because only employees have rights under most statutes regulating work, including wage and hour, anti-discrimination, and collective bargaining law. Too often judges exclude workers from statutory protection who resemble what legal scholars have described as typical, industrial employees — long-term, full-time workers with set wages and routinized responsibilities within a large firm. To explain how courts reach these counterintuitive results, the article examines recent federal decisions finding that FedEx delivery drivers are independent contractors rather than employees. It argues that the problem is embedded within the employment contract itself, in the law’s attempt to construe the legal relations of master and servant as a contract. The contemporary employment contract is product of a 19th century incorporation of master-servant authority into contracts for labor services. In the face of institutional disruption, the contradiction within employment between contractual equality and servitude tends to surface in the form of two doctrinal ambiguities. Both make the dominant standard for employment status irresolvable by merging contractual formation and performance. First, the attempt to fit master-servant authority in the framework of contract creates an ambiguity between the activities of bargaining over the work and carrying out the work, or between contracting and producing. Second, it makes ambiguous the relationship between a written agreement and contractual duties. The way in which FedEx organized the drivers’ work manipulated these ambiguities, which enabled the courts to maintain that features of the work that ordinarily, and under the governing legal tests, would be evidence of employment were here consistent with, or even evidence of, independent contracting. In fact, the courts transform some of the same vulnerabilities that place the drivers within the policy concerns of collective bargaining and wage and hour law into evidence of their autonomy. The attempt to encase master-servant relations in contract also destabilizes distinctions between firms and markets. The ambiguity in employment between contracting and producing exposes a tension within major economic theories of the firm: employment is the legal rationale for a firm’s centralized control over indirect, hierarchical, and multilateral relations in production; as a contract, however, employment is a direct and bilateral relationship between equal parties in a market. The FedEx decisions marshal this tension to redefine a firm, as conceptualized by major theories of the firm, as a market. Multilateral relations among drivers as they work under FedEx’s direction appear as bilateral contracts between drivers in a decentralized market. The courts conflate the impersonality of bureaucracy — in which work is embedded in sophisticated technology and a supervisory hierarchy — with the impersonality of the market. The drivers’ very fungibility as low-skilled workers performing standardized routines becomes evidence of their entrepreneurial opportunity. The article hypothesizes that the invisibility of logistics and communications technology, relative to the heavy machinery of industrial manufacturing, helped the courts to submerge the FedEx bureaucracy beneath a nexus of contracts. It critiques the decisions for rejecting theories of the firm that ground the legitimacy of the corporation in the efficient production of goods and services. The article concludes with a thought experiment showing how, using the arguments in the FedEx decisions, one could reinterpret assembly line employment as independent contracting.