Full opinion text
OPINION and ORDER ROBERT L. MILLER, JR., District Judge. This matter is before the court on the parties’ cross-motions for summary judgment concerning whether FedEx drivers are employees or independent contractors under the Kansas Wage Payment Act, Kan. Stat. Ann. § 44-313 et seq. Numerous summary judgment motions pend in both the certified and non-certified class-actions. This opinion sets forth facts commonly applicable to all certified class actions and addresses the Kansas plaintiffs’ motion for summary judgment (doc. ## 1163, 1248) and FedEx’s cross-motion for summary judgment (doc. # 1215). The court also addresses FedEx’s motion to strike individualized proof submitted in support of the plaintiffs’ summary judgment motions (doc. # 1398) and the plaintiffs’ motions to augment the record in support of their summary judgment motions (docs. ## 1992, 2064, and 2087). The court GRANTS FedEx’s motion to strike individualized proof to the extent the plaintiffs rely on the submitted documents in support of summary judgment to show individual contractors’ experiences in class certification cases. The court cannot make generalizations about the class as a whole from a review of the actual control FedEx exercised over a segment of drivers. The court exercises its discretion to DENY the plaintiffs’ motions to augment the record. The documents the plaintiffs propose to submit are relevant to only a small segment of the plaintiff classes, cumulative of the evidence already submitted, or of little evidentiary value. The court DENIES FedEx’s requests for oral argument on the motions for summary judgment (doc. ## 1400 and 1471). The court finds that this matter can properly be resolved by a review of the parties’ extensive evidentiary record and summary judgment briefing. The court DENIES the plaintiffs’ motion for summary judgment and GRANTS FedEx’s cross-motion. The plaintiffs have all signed Operating Agreements labeling themselves as independent contractors, they can hire others to perform their assigned work and go work for another delivery company, and they can sell their routes to other qualified drivers; yet, they contend they are employees. The court sees it differently. Upon review of the evidence in the light most favorable to the plaintiffs, the only reasonable inference is that FedEx hasn’t retained the right to direct the manner in which drivers perform their work. FedEx supervises the drivers’ work and offers numerous suggestions and best practices for performance of assigned tasks, but the evidence doesn’t suggest that FedEx has the authority under the Operating Agreement to require compliance with its suggestions. Further, other factors strongly weigh in favor of independent contractor status; in particular, the parties intended to create an independent contractor arrangement, the drivers have the ability to hire helpers and replacement drivers, they are responsible for acquiring a vehicle and can use the vehicle for other commercial purposes, they can sell their routes to other qualified drivers, and FedEx doesn’t have the right to terminate contracts at-will. Although some facts weigh in favor of employee status, after considering all the relevant factors, the court finds that the plaintiffs are independent contractors as a matter of law. I. Common Facts Applicable to Right to Control The court sets forth the facts from the perspective of what control FedEx has the right to exercise over its drivers and not necessarily what control FedEx actually exercises on a daily basis. While FedEx managers might exercise more control than what is retained in the Operating Agreement and commonly applicable policies and procedures, the class was certified on the basis of right to control, not actual exercise of control. The plaintiffs reiterated to this court during class certification that they could show right to control by reliance solely on the Operating Agreement and applicable policies and procedures and wouldn’t go beyond those documents to prove their ease. In short, the issue for today’s purposes is what control FedEx had the right to exert pursuant to the parties’ contractual relationship. FedEx’s Business FedEx Ground, together with its operating division FedEx Home Delivery, provides small-package pick-up and delivery services through a network of pick-up and delivery drivers/contractors. FedEx Home Delivery provides small package delivery services primarily to residential customers, while FedEx Ground focuses on the pick-up and delivery of small packages to businesses. FedEx Services, Inc. sets pricing policy and rates for FedEx and supplies shared technology infrastructure support across all FedEx companies. Business Objectives in the Operating Agreement The Kansas plaintiffs, individually or through a sole proprietorship or corporation, entered into either a Ground or Home Delivery Operating Agreement with FedEx to provide daily pick-up and delivery service. Contractors agree to conduct their businesses so that they can be identified as part of the FedEx system. OA, Background. The Operating Agreement states that “[b]oth [FedEx] and Contractor intend that Contractor will provide these services strictly as an independent contractor, and not as an employee of [FedEx] for any purpose.” Id. The Operating Agreement is to “set forth the mutual business objectives of the two parties intended to be served by th[e] Agreement— which are the results the Contractor agrees to seek to achieve — but the manner and means of reaching these results are within the discretion of the Contractor.” Id. “[N]o officer or employee of [FedEx] shall have the authority to impose any term or condition on Contractor or on Contractor’s continued operation which is contrary to this understanding.” Id. The “Contractor agrees to direct the operation of the Equipment and to determine the methods, manner and means of performing the obligations specified in this Agreement.” Id. at ¶ 1.4. The Operating Agreement specifically sets forth FedEx’s standards of service. To achieve FedEx’s business objectives, the drivers agree to: (a) Provide daily pick-up and delivery service to consignees and shippers on days and at times which are compatible with their schedules and requirements within Contractor’s Primary Service Area, ... and in such other areas as Contractor may be asked to service,[] all consistent with the competitive standards within the industry (provided, however, that on any day where the volume of packages available for delivery or pick-up in Contractor’s Primary Service Area exceeds the volume that Contractor can reasonably be expected to handle on such day, [FedEx] may reassign a portion of such packages to another contractor); (b) Make reasonable efforts to retain and increase the base of shippers and consignees served and the number of packages per shipper within Contractor’s Primary Service Area; (c) Handle, load, unload and transport packages using methods that are designed to avoid theft, loss and damage; (d) Cooperate with [FedEx’s] employees, customers and other contractors, to achieve the goal of efficient pick-up, delivery, handling, loading and unloading of packages and equipment, and provide such electronic and/or manual data pertaining to package handling as is reasonably necessary to achieve this goal; (e) Foster the professional image and good reputation of [FedEx] ... including adhering to vehicle identification and operator appearance standards ...; (f) Conform to all applicable federal, state and local laws, regulations and ordinances; (g) Cause the Equipment to be operated safely and in compliance with all applicable laws and regulations; and (h) Conduct all business activities with integrity and honesty, in a professional manner, and with proper decorum at all times. Id. ¶ 1.10. The parties agree that “Contractor shall be responsible for exercising independent discretion and judgment to achieve the business objectives and results ... and no officer, agent or employee of [FedEx] shall have the authority to direct Contractor as to the manner or means employed to achieve such objectives and results.” FXHD OA, ¶ 1.14; FXG OA, ¶ 1.15. For example, FedEx can’t “prescribe the hours of work, whether or when the Contractor is to take breaks, what route the Contractor is to follow, or other details of performance.” FXHD OA, ¶ 1.14; FXG OA, ¶ 1.15. Policies and Procedures FedEx has many written policies and procedures in place directed toward FedEx employees involving management of FedEx business operations. FedEx managers are expected to know the policies and procedures and generally are expected to follow them to the extent it makes good business sense to do so. In 2005, FedEx began a “Document Reengineering Initiative” to overhaul its policies, procedures, and forms. That initiative was meant to clarify the line between policies (statements “outlining a mandatory course of action”) and procedures (statements “providing the how and when or how often for implementing the policies”), so that FedEx managers could better understand FedEx’s expectations. Among the changes was Policy-007, reiterating that FedEx employees must adhere to the Operating Agreement in their interactions with drivers, that the terms of the Operating-Agreement can’t be modified, and, most significantly, that “[njo officer, agent or employee of FedEx Ground has the authority to direct the contractor as to the manner or means employed to achieve such objectives and results.” (FedEx Exh. B-02 (emphasis in original)). Policy-007 repeats the language of Section 1.15 of the Operating Agreement as a policy and states that a violation of its terms may result in disciplinary action against the manager. Dan Sullivan, who was FedEx’s CEO until January 2007, testified that he “would expect [FedEx drivers] to follow policy within general parameters but provide a certain amount of discretion in the administration of these policies and procedures depending upon terminal location, the issues in each facility, those kinds of things which are all different.” Sullivan Dep., p. 162. In explaining the manager’s reliance on FedEx policies, Mr. Sullivan stated: Obviously, all policies are there for a reason. They should be considered by the management. The management should try to follow them, but the management also has discretion to do the right thing for the business, the right thing for the customer, the right thing for our people within the parameters of those policies and procedures ... so that they are administered somewhat differently in each circumstance. Sullivan Dep., pp. 163-164. FedEx’s Executive Vice President and Chief Operating Officer Rodger Marticke testified that FedEx expects managers to “adhere to company policies to the extent that it makes good business sense.” Marticke Dep., p. 92. Division Vice President and Former Managing Director James Primm testified that FedEx confers discretion on its senior managers as to how to apply procedures so long as that discretion doesn’t result in not achieving company results or violating federal law. Primm Dep., p. 212. Regular and Integral Part of FedEx’s Business FedEx drivers’ work is a regular and integral part of FedEx’s business. FedEx Vice President of Contractor Relations Robert Ostrov testified that contractors are a cornerstone of FedEx’s business. Ostrov Dep., pp. 192-193. Former CEO Dan Sullivan testified that the contractor is meant to be a “centerpiece” of FedEx’s “work force” and is an “essential component of [FedEx’s] business.” Sullivan Dep., pp. 27, 106; see also Emmanuel Monti, Senior Manager of Contract Relations, Dep., p. 204 (describing FedEx drivers as being part of the FedEx “network”). It is undisputed that the drivers’ work was performed within the usual course of FedEx’s business. Approval Requirements for Contractors and Replacement Drivers FedEx has minimum eligibility requirements for people to become FedEx contractors. They must have no felony convictions, be 21 years of age or older, have a certain level of driving experience or undergo training, have the required driver’s license, have a 36-month driving record that meets specific minimum requirements, undergo a drug screen and physical, and be able to obtain a delivery vehicle. Contractors can run them own routes, hire helpers, or hire replacement contractors. Newman Deck, ¶¶ 15, 17. Non-driver helpers must be 18 years old and pass a background check. See Procedure: Authorization Process for Non-Driving Helper, CRL-566. Replacement drivers are subject to FedEx approval in other respects. The Operating Agreement says contractors may use others to assist them; all persons so utilized “shall be qualified pursuant to applicable federal, state and municipal safety standards and [FedEx] Safe Driving Program standards.” OA, ¶ 2.2. The Operating Agreement further requires that replacement drivers be “fully trained, at Contractor’s expense, to operate the Equipment,” and the contractor is responsible for ensuring that the replacement driver “conform fully to the applicable obligations undertaken by Contractor pursuant to this Agreement.” Id. The Safe Driving Program sets minimum experience, age, licensure, driving record, criminal record, and drug-and-alcohol abuse requirements. The program requires a showing of satisfactory work history and mandates compliance with basic safety and maintenance requirements. OA, Safe Driving Addend. FedEx policies state that all operators, including assistants and substitutes, must complete a road test, submit a driver information sheet, and (depending on work history) complete a FedEx-approved training course. See CRL-551, at 5-12 (PI. Exh. 2:147-54) (“The individual must meet the minimum driver qualifications and requirements established by the Federal Motor Carrier Safety Regulations and FedEx.”). Mr. Sullivan testified that the drivers must meet certain FedEx standards, such as grooming requirements, but terminal managers have discretion in assessing whether individuals meet FedEx’s requirements to provide service. Sullivan Dep., pp. 210, 212. FedEx is a registered motor carrier subject to the Department of Transportation’s regulatory control. Scapellato Rept. (Nov. 8, 2007), p. 11. Federal law for vehicles 10,001 pounds or more imposes many of FedEx’s driver requirements; federal commercial driver’s license and alcohol/drug testing are required for vehicles 26,001 pounds or more. FedEx expert witness James Scapellato stated that “[a]s the regulated motor carrier, FedEx ... is ultimately responsible for the safe operation of all commercial vehicles providing transportation services under its DOT number.” Scapellato Rept. (Nov. 8, 2007), p. 14. “As a regulated motor carrier, FedEx ... must insure that each and every owner operator who operates under its DOT authority, as well as any driver working for an owner operator, achieves a satisfactory degree of safety compliance.” Scapellato Rept. (Jan. 8, 2007), p. 6. For example, FedEx must keep a DOT file on each driver to provide “documentary proof that the driver ... meet[s] standards imposed by federal safety requirements and that they can, by reason of experience, training, or both, safely operate the assigned commercial motor vehicle.” Scapellato Rept. (Jan. 8, 2007), p. 14; see also 49 C.F.R. § 391.1 et seq. FedEx, however, has “adopted into policy many higher safety standards than those mínimums prescribed in the federal motor carrier safety regulations to help business efficiency and reduce highway crashes.” Scapellato Rept. (Jan. 8, 2007), p. 12. Training Contractors have the obligation to assure that everyone who operates the equipment is fully trained and capable of meeting the customer service standards set forth in the Operating Agreement. FXHD OA, ¶ 1.13; FXG OA, ¶ 1.14. FedEx provides formal training to its drivers, but whether training is required varies from driver to driver. As of 2005, new FedEx contractors with six months’ verified experience as a commercial motor vehicle operator within the previous five years aren’t required to participate in Quality P & D Learning (QPDL), which, as FedEx explains, wasn’t widely available until 2003 and isn’t training, but a precondition, to becoming a contractor. Since November 2007, FedEx accepts training obtained from an “approved” FedEx vendor in lieu of prior experience or the FedEx QPDL course. QPDL is a multi-day course consisting of a combination of classroom and on-the-road instruction meant to ensure compliance with federal safety regulations. The 2003 QPDL Participant Manual, however, addresses a number of topics, such as customer service skills, vehicle entrance and exit routines, route planning, terminal a.m. routines, delivery techniques, package handling techniques, scanning and sheeting, driver release of packages, and pick-up techniques. TM-205A (Aug. 2003). FedEx managers also hold weekly safety meetings that drivers should attend where managers address safety-related or operational issues. Attendance at certain safety meetings once was required, but is now voluntary, although managers still take attendance at those meetings. FedEx also conducts an orientation program during contractors’ first thirty days to familiarize them with various service quality procedures. FXHD OA, ¶ 1.13; FXG OA, ¶ 1.14 (“[FedEx] shall, during the first 30 days of the term of this Agreement, familiarize Contractor with various quality service procedures developed by [FedEx].”); see also FedEx Owner-Operator Familiarization Program, PI. Exh. 5:306 (stating that the program is approximately ten hours). Drivers may enter the CARE training program to expunge a verified customer complaint from their record; managers often recommend that drivers attend such training for that purpose. The CARE program consists of the driver watching a video, receiving a manual, and participating in a follow-up business discussion (a documented meeting with the drivers’ manager). The program instructs drivers on ways to achieve customer satisfaction and practices so as to avoid customer complaints. FedEx used to distribute a Contractor’s Companion to drivers, a document developed “to assist the contractor [in] the day-to-day administration of his or her duties.” Sullivan Dep., p. 236. The Home Delivery Contractor’s Companion is dated January 2003 and the Ground Contractor’s Companion is dated December 2003. FedEx has described it as a summary of things that contractors should consider when performing their duties or a reference guide that gives contractors an idea of the best practices to use when interacting with customers. Sullivan Dep., pp. 235-236; Mark Byrum (Divisional Vice President) Dep., pp. 210-211. There are differences between the Home Delivery and Ground Contractor’s Companion, but generally they include information concerning customer service tips, scanner troubleshooting and status codes for deliveries, daily supply checklist, vehicle pretrip inspection, C.O.D. handling, driver release guidelines and tips, service crosses and call tag processes, pick-up tips, and FAQs for different types of situations the driver might encounter. The Contractor’s Companion is no longer available. Uniform and Appearance Drivers must wear the FedEx uniform and maintain a professional appearance. The Operating Agreement provides that the uniform should be “maintained in good condition” and the driver will “keep his/her personal appearance consistent with reasonable standards of good order as maintained by competitors and promulgated from time to time by [FedEx].” OA, ¶ 1.12. The uniform is required because “the presentation of a consistent image and standard of service to customers throughout the system is essential in order to be competitive ... and to permit recognition and prompt access to customers’ places of business.” Id. Senior Manager of Contract Relations Emmanuel Monti testified that the FedEx driver “is the most highly visible person out there ... and his physical appearance, the way he interfaces with customers, tells a lot about the company and tells the customer basically whether they want to continue to do business [with FedEx].” Monti Dep., pp. 202-203. Central Division Vice President Robert Holcombe testified that the drivers’ “[a]ppearance is important because of the brand and the importance of brand image,” which allows the drivers “access into customers’ locations.” Holcombe Dep., p. 216. Mr. Holcombe also testified that the FedEx logo is important for advertising and marketing of the brand. Holcombe Dep., pp. 259-260; see also Sullivan Dep., p. 263 (testifying that the drivers’ uniform and truck are used to project FedEx’s image). FedEx terminal managers generally observe drivers’ appearance and check for compliance with paragraph 1.12 of the Operating Agreement. FedEx Admission (Set 1), No. 12, at 32. The terminal managers are supposed to make sure that the drivers are both in proper uniform and properly groomed before they go out to service FedEx customers. Sullivan Dep., p. 187. The senior manager has the authority to tell drivers they can’t service customers if they aren’t in proper uniform or aren’t properly groomed. Sullivan Dep., pp. 187-188. Vehicles Contractors are responsible for obtaining their vehicles, and they bear all costs and expenses associated with their vehicles, such as vehicle payments, fuel, taxes, insurance, and maintenance. OA, ¶ 1.3 (contractor required to bear all costs and expenses incidental to operation of the equipment, including risks of depreciation, maintenance, fuel, oil, tires, repairs, taxes, insurance coverage, etc.). Each vehicle must be painted “FedEx White” and bear FedEx logos and advertising. While federal regulations require that FedEx’s name be legibly marked on two sides of the truck, FedEx’s marking requirements extend beyond federal regulations. Scapellato Rept. (Nov. 8, 2007), pp. 16-17 (“Although obviously not specifically required by the regulations, business markings and branding displayed on the vehicle obviously provide more effective notice to the public who is performing the transportation service.”). The drivers can use their vehicles for other commercial or personal purposes when not actually carrying FedEx packages, as long as they mask or remove the identifying marks and logos. OA, ¶ 1.5. The Operating Agreement provides that “subject to the determination of [FedEx] of its suitability for the service called for in this Agreement, the selection and replacement of the Equipment is within the discretion of Contractor.” OA, ¶ 1.1. Vehicles must, though, meet FedEx’s minimum specifications — e.g., maximum height, width, and length; maximum bumper height; interior shelving requirements; and, in some cases, age restrictions. The vehicle goes through a FedEx approval process based on these specifications. Robert Flesher (Managing Director of Vehicle Maintenance) Dep., pp. 135-136 (2007), pp. 39-40 (2006). FedEx decides what size and configuration of truck is appropriate for a particular route. FedEx’s Answers to Interrogatories (Set 5) # 301, at 32. Senior Vice President of Terminal Operations Michael Mannion testified that FedEx reserves the right to approve or reject a particular vehicle if its size isn’t sufficient to provide service to the primary service area. Mannion Dep., p. 239. FedEx managers “look at every single situation separately with every contractor and really understand what his business plan is going to be” when determining the proper size of a truck for a particular area. Mannion Dep., p. 239. A contractor with a vehicle that doesn’t meet FedEx’s minimum requirements can still request approval through an exception process. Flesher Dep., pp. 143-145. Before 2008, FedEx purchased fleets of vehicles built to its specifications that contractors could buy or lease. FedEx also entered into relationships with outside vendors who offered financing or leasing of vehicles to contractors. In 2008, FedEx began outsourcing all its van sales to outside vendors and is now removed from the sales process. FedEx has the right to evaluate contractors’ trucks to ensure they comply with FedEx appearance standards and DOT guidelines. OA, ¶ 1.12 (“[T]he Equipment shall be maintained in a clean and presentable fashion free of body damage and extraneous markings, in accordance with the standards of the industry.”); James Krappa (Managing Director for Contractor Relations) Dep., pp. 156-157; Flesher Dep. pp. 83-84 (Sept. 2007). Terminal managers also must ensure proper completion of monthly maintenance record forms reflecting any repairs or maintenance work the driver performed on his vehicle. RVEH002 at 1 (PI. Exh. 2: 1480); see also Ground OA ¶ 1.2 (“Contractor agrees to provide [FedEx] with proof of timely maintenance and inspection of the Equipment in accordance with the periodic mandatory vehicle maintenance and inspection regulations administered or required by any federal, state or municipal agency with jurisdiction over the operations described in this Agreement.”). FedEx should conduct an inspection of the vehicle every thirty days. Terminal managers have discretion to remove a vehicle from service if it doesn’t meet appearance standards or the driver fails to timely submit maintenance reports. See, e.g., OA, ¶ 1.2. Alternatively, the manager can discuss the matter with the contractor. FedEx expert James Scapellato explained that for vehicles weighing 10,001 pounds or more, FedEx, “as the responsible motor carrier, must periodically examine or inspect an owner-operator’s vehicle to determine safety compliance with vehicle parts and accessories standards and out-of-service criteria.” Scapellato Rept. (Nov. 8, 2007), p. 11; Scapellato Rept. (Jan. 8, 2007), p. 21; see also 49 C.F.R. § 396.3 (requiring inspection, repair, and maintenance of motor vehicles). Paragraph 1.2 of the Operating Agreement requires contractors to maintain their vehicle at their own expense, in accordance with the safety and equipment standards specified in applicable federal, state, and municipal laws. Tools and Instrumentalities Under the Operating Agreement, the contractor “shall not be required to purchase or rent any products, equipment, or services from [FedEx] as a condition to entering into [the agreement].” OA, ¶ 7. Contractors can obtain most of the tools, instrumentalities, and services they need, such as uniforms, scanners, printers and communications-related equipment, DOT inspections, and equipment washing services, from FedEx’s Business Support Package. FXHD OA, ¶ 7 and Addend. 6; FXG OA, ¶ 7 and Addend. 7. Contractors pay for these supplies and services through deductions from their weekly settlement. FedEx’s BSP is an optional program, but ninety-nine percent of contractors participate. The BSP also includes Contractor Assistance, which before June 2007 consisted of the following programs: battery program, back-up camera program, body repair program, hand truck program, preventative maintenance program, rear door program, and tire program. The Contractor Assistance was revised in June 2007 to eliminate the contractors’ ability to purchase equipment or pay for maintenance under the program. Contractors also can participate in the Maintenance Loan Program. In early 2006, the Maintenance Loan Program was added as a FedEx Home Delivery settlement component. Under this program, FedEx provides contractors with loans against the balance in their Service Guarantee Account to fund maintenance costs. FXHD OA, ¶ 5; FXG OA, ¶ 8. Contractors must repay the loans through deductions from their weekly settlement. Typically, FedEx terminals have package handling equipment, belts for moving packages to the vehicles, a staging area, a “Quality Assurance area” for processing packages, assigned parking spaces for drivers to park their vehicle while loading, and a check-in area. FedEx also has developed proprietary automated overhead laser sorting technologies, computer systems and software for tracking packages, and processes for customer payments. Compensation and Benefits Contractors are paid weekly, and compensation rates and formulae are set forth in the Operating Agreement at ¶ 4.1 and Addendum 3; compensation includes daily rates, piece rates, and various bonuses, including a bonus for years of service and performance. The compensation amounts vary by individualized factors, such as the type of vehicle used, number of packages delivered and stops serviced, weight and nature of the packages, miles traveled, temporary core zone density, and time of service. Ground contractors participating in the “Flex Program” receive a daily “flex fee.” OA, ¶ 4.1 and Addend. 3. When contracting with an entity, FedEx pays the entity, not the individual driver. The temporary core zone density is paid to contractors providing services in low density, low package volume areas; the core zone payment is reduced or eliminated as density or volume increases. OA, ¶ 4.1(c). Until 2007, core zone compensation was prorated if the driver provided pick-up or delivery services for less than seven hours in one day. FedEx removed the hours reference and now conditions full payment of the core zone settlement on the driver making a minimum number of stops, which assumes, in part, expected daily work hours. Compensation rates aren’t negotiated, though some contractors have requested and received changes to their core zone density settlement. See CRL-55, p. 2 (“A [driver] may ... request a service ride to evaluate temporary core zone density settlement.”). Contractors can choose to not sign a yearly modified settlement addendum. Contractors also can receive the “Contractor Customer Service” bonus, a monthly performance-based bonus that drivers receive when they achieve certain safety and customer service goals — e.g., no at-fault accidents, no verified customer complaints. FXHD OA, Addend. 8; FXG OA, Addend. 6. A contractor can expunge one verified customer complaint from his record and still receive the CCS bonus if he or his driver participates in the CARE training program. FedEx notes that the CCS bonus structure has changed over time — some requirements have been eliminated in the current version of the Operating Agreement — and the bonus applies differently to Ground and Home Delivery drivers. At Ground, the CCS bonus includes a weekly “Pick-Up Service Bonus.” The requirements for the Pick-Up Service Bonus have changed over time; today’s version indicates that contractors will receive the bonus when there are no missed pick-ups, all scheduled pick-ups are made within the requested windows (with a twenty-minute grace period at the end of the pick-up window), and the scanner is used to process all pick-up stops (with the allowance of two instances of noncompliance per month for late pick-ups and/or manual reconciliations for improper use of the scanner). FXG OA, Addend. 6. Before 2007, the CCS bonus included a “Terminal Group Performance-related Bonus.” Contractors were eligible for the bonus if their terminal met its inbound service goal for a particular period. The bonus was issued on a terminal-wide basis, so either all the contractors at the terminal received the bonus, or no one did. FXG 2004 OA, Addend. 6; FXHD 2004 OA, Addend. 8. FedEx offers its contractors certain benefits, such as a driver-funded retirement plan, matching contributions to the “Service Guarantee Account,” a college scholarship for drivers with children, and a time-off program based on seniority. FedEx has no responsibility to make deductions for, or to pay, health, welfare, and pension costs, withholding for income taxes, unemployment insurance premiums, Social Security taxes, or any other similar charges. OA, ¶ 4.2. FedEx issues contractors a Form 1099 at each year end, and the contractors report their taxes as independent contractors. Each contractor agrees to obtain and keep work accident or workers compensation insurance, but, at his option, can obtain coverage under a policy negotiated by FedEx. OA, ¶3.6. Delivery Information FedEx drivers must record information about all package deliveries. OA, ¶ 1.10(d). Paragraph 1.10(d) of the Operating Agreement requires contractors to “provide such electronic and/or manual data pertaining to package handling,” as necessary to achieve “efficient pick-up, delivery, handling, loading and unloading of packages and equipment.” OA, ¶ 1.10(d). While package delivery information can be recorded manually, the vast majority of drivers use FedEx scanners. FedEx employees testified that a scanner isn’t required, see Julie Brooks (Senior Manager for FHD) Dep., p. 303, but Mr. Sullivan testified that contractors must use a scanner so that customers can track their packages. Sullivan Dep., p. 214. FedEx manuals state that “[ejvery package and Call Tag assigned to a P & D contractor for delivery must be scanned with a STAR scanner ... [except in] contingency situations .... The P & D contractor records legible delivery information and obtains a legible recipient signature (when required) at the time of delivery.” PI. Exh. 2:282-283; PI. Exh. 2:296-297. The scanners are connected to FedEx’s computer system and transmit package tracking information to FedEx’s website for customers to view. Drivers are required to record on-duty, dispatch and return times, package tracking information, and odometer readings. As a motor carrier, federal regulations require FedEx to monitor the drivers’ on-duty time and driving time. Scapellato Rept. (Nov. 8, 2007), p. 18. Certain shipping information, such as item shipped, name of the shipper and consignee, and date of the shipment, also must be maintained under regulations. Days and Hours of Service and Daily Work Assignments FedEx drivers are required to provide service on the days FedEx is open for operation, meaning the days FedEx agrees to provide service to customers. OA, ¶ 1.10(a); Sullivan Dep., p. 171. The company has authority to change the days of service. Sullivan Dep., p. 182. Ground drivers generally work Monday through Friday, and Home Delivery drivers generally work Tuesday through Saturday. Under the Operating Agreement, “[t]he company reserves the right to name the work days preceding and following any holiday falling on or in conjunction with a weekend.” OA, Addend. 3(II)(D). There is no set time that a contractor must be at the terminal, but “[a] contractor is not supposed to leave the terminal [at the start of the day] until all his packages are available to him.” Michael Mannion (Sr. V.P. Terminal Operations) Dep., p. 305. Mr. Mannion explained that this is more of an expectation for drivers’ convenience, not a requirement. Mannion Dep., pp. 379-380. While at the terminal, either the driver or a FedEx employee loads the packages onto the truck. FedEx procedures indicate that -drivers should perform a “check-out” with their manager before leaving the terminal. Managers may provide the drivers with a delivery manifest, review drivers’ settlement report and deliveries made the previous day, or discuss any DNAs (packages where delivery was not attempted) or other service failures with the driver. The manifest lists the packages for delivery that day; this information may be loaded directly on the scanner. Although drivers in the Home Delivery division are given turn-by-turn directions, these directions are only a tool for the contractors to use. FXHD OA, ¶ 1.14; FXHD OA, ¶ 1.15 (“[N]o officer, agent or employee of [FedEx] shall have the authority to prescribe .... what route the Contractor is to follow.”). Drivers are responsible for attempting delivery of every package in their work area each day and every package assigned under the Flex Program, if applicable. Although FedEx requires the contractors to try to make all deliveries assigned for that day, drivers can choose to hire someone to fulfill their route obligations. Drivers aren’t required to appear at pick-up and delivery stops at specific times, except when FedEx negotiates a pick-up or delivery window at a customer’s request; drivers then must make the appointed pick-ups or deliveries within that window of time or make other arrangements through FedEx or directly with the customer. For example, Ground drivers who pickup from a FedEx World Shipping Center or FedEx Kinko’s can’t do so before 5:00 p.m. and 6:00 p.m., respectively. FedEx also offers Home Delivery customers evening service that guarantees that the package will be delivered between 5:00 p.m. and 8:00 p.m. FedEx Home Delivery drivers must provide those services when FedEx requests or pass them over to another driver. Senior Manager of Home Delivery Julie Brooks testified that she would consider a contractor’s refusal to comply with those services a service failure. Brooks Dep., pp. 11-12. Home Delivery drivers aren’t required to return to the terminal at the end of their day, but Ground drivers who pick up customer packages must return by a certain time and perform a “check-in” process with their service manager. If Home Delivery or Ground drivers collect charges for C.O.D. packages, they are required to return the charges to the terminal at the end of the day. OA, ¶ 1.8 (“Contractor ... agrees to collect any charges owed by shippers and recipients and to return all collected charges to [FedEx] at the end of each business day.”). The drivers must mark and return to the terminal all undelivered packages. OA, ¶ 1.11. Managers are supposed to track daily the number of stops assigned to each driver and, at the end of the day, the actual number of stops made. FedEx drivers typically are required to flex packages. Flexing is the daily expansion or contraction of a drivers’ work area; it involves the movement of packages or stops from one work area to another if the volume of packages or stops is more than a driver reasonably can handle. P & D Planning Seminar Participant Manual, TM-410PRes, Version 2.0. Under the Home Delivery Operating Agreement, contractors agree to “[p]rovide daily delivery and pick-up service ... within Contractor’s Primary Service Area ... and in such other areas as Contractor may from time-to-time be asked to service.” FXHD OA, ¶ 1.10(a). Under the Ground Operating Agreement, drivers agree to provide services “in such other areas as Contractor may be asked to provide service in the event Contractor elects to participate in the Flex Program.” FXG OA, ¶ 1.10(a). More than ninety-nine percent of Ground drivers participate in the Flex Program. FXG OA, ¶ 9 (“By electing to participate, Contractor agrees to accept packages from outside Contractor’s Primary Service Area for pick-up and delivery, up to daily pickup and delivery capacity ... when requested to do so by FedEx Ground terminal management.”). Contractors previously were restricted from flexing packages informally among themselves. For both Ground and Home Delivery, the Operating Agreement states that “on any day where the volume of packages available for delivery or pick-up in the Contractor’s Primary Service Area exceeds the volume that Contractor can reasonably be expected to handle on such day, [FedEx] may reassign a portion of such packages to another contractor.” OA, ¶ 1.10(a). The Operating Agreement says FedEx “will seek to manage its business so that it can provide sufficient volume of packages to Contractor to make full use of Contractor’s equipment.” OA, Background. To accomplish this, FedEx would try to structure the drivers’ routes so vehicles are in use nine to eleven hours per day; this measurement was called the “Service Flex Range” and would vary between facilities. The Service Flex Range represented “the minimum and maximum number of stops that can be delivered by a trained contractor working at ‘industry standard’ time [on that particular route].” Operations Management Handbook, Ch. 2 (2001). FedEx replaced the “Service Flex Range” in the Fall of 2005 with a metric guideline called the “Delivery Stop Guideline” that eliminates the minimum stops, but otherwise is similar to the “Service Flex Range.” The new metric guideline also sets forth a maximum number of stops a driver, while utilizing his vehicle fully, reasonably can handle on any given day. These measurements are used to determine the flexing of packages. Management and Supervision FedEx managers are expected to conduct at least two business discussions each year with each contractor; in August 2005, this goal was clarified as not mandatory because it is a procedure, not a mandatory policy. OPR 560 (procedure); UNV-001 (describing difference between policies and procedures). Business discussions are a means for managers to provide recommendations and counseling to contractors in performing their contracted work. A manager or contractor might request a business discussion to review the contractor’s overall performance or operation, to document agreed predetermined flexes, to discuss customer feedback or complaints, or to address issues that arise between the manager and contractor. CRL-560, at 1-2 (2006). For example, a FedEx manager can request a business discussion to discuss DNAs, missed pick-ups, or improper documentation, to suggest ways the contractor can improve his performance, or to provide positive feedback on the contractor’s safe driving or customer service skills. While FedEx may not be able to force the contractor to engage in a business discussion, not participating will reflect poorly on the contractor upon contract renewal. Mannion Dep., pp. 278-279. The manager documents the meetings on a FedEx form and keeps the information in the contractor’s business discussions file. These documents can be used to support contract termination. A FedEx driver’s performance is reviewed through various audits and customer service rides. Managers are to conduct daily van service audits of every driver to ensure compliance with FedEx procedures for undelivered packages; the resulting reports reflect any packages the driver didn’t try to deliver and the driver’s scanning compliance rate. FedEx also hires security specialists to do random in-route van security reviews, during which they inspect drivers’ vehicles to verify that drivers are securing the vehicles properly when delivering packages, e.g., the vehicle isn’t left running, the bulkhead door is closed, and packages are secured. See Loss Prevention Manual, Vehicle Security Review, p. 18, PI. Exh. 4:587 (describing the procedure that loss prevention staff should follow during vehicle security reviews). Failing to secure a vehicle is a violation of the Operating Agreement and should result in a business discussion with the contractor. At FedEx Home Delivery, FedEx reserves the right to perform driver release audits to ensure proper release of packages to customers without their signature. A driver release audit involves the manager going out on a driver’s route for about ten stops after the driver leaves the terminal. The manager follows the driver and sometimes interviews customers to determine whether the driver is releasing customers’ packages properly. See HD Driver Release Audits Participant Manual, TM-406PRes (12/03), PI. Exh. 4:521 (“The driver release audit program focuses on how to better serve the external customer by ensuring the proper methods are used when driver releas[es] packages.... As a service manager, you have an important role in communicating the most effective methods of driver releasing packages, and ensuring the contractors see the importance of being customer focused.”). After the driver-release audit, the manager generally offers suggestions for improvement. FedEx presents evidence that the audits aren’t applied uniformly company-wide and terminal managers have discretion in enforcing driver release procedures. The frequency of the audits has changed during the relevant period from quarterly to yearly, and the procedure is done only at residences. Contractors approved for the Residential Driver Release Program won’t be liable for loss resulting from a proper driver release. If no signature is required, the driver must leave the package in an approved area, out of public sight, and in a location that isn’t accessible to animals or susceptible to weather damage. FXHD OA, “Residential Driver Release Program” Addend. The Driver Release Program indemnifies contractors for packages released to residences, not businesses. Drivers should leave packages at businesses without a signature only when the driver has written approval from the recipient. DLV-005-FedEx Procedure: Driver Released Packages, FXG. Mr. Sullivan testified that driver release procedures for both residential and business deliveries are rules that contractors should follow. Sullivan Dep., pp. 226-227. Terminal managers should hold a business discussion with any contractor who doesn’t follow the procedures, and the contractor might lose his CCS bonus. Sullivan Dep., p. 227. Conversely, Vice President of Contractor Relations Robert Ostrov described the driver release procedures as recommendations. Ostrov Dep., pp. 236-237. FedEx managers must conduct two, but not more than four, customer service rides each year. CRL-555, p. 2. The customer service rides give managers a chance to see if drivers are complying with FedEx’s customer service standards and to ensure that drivers are operating their vehicles safely. FXHD OA, ¶ 1.13; FXG OA, ¶ 1.14 (“[(Qualified [FedEx] terminal personnel may, at their option, visit customer locations with Contractor four times annually to verify that Contractor is meeting the standards of customer service provided in this Agreement.”). Managers’ goals during the customer service rides might include reviewing pickup and delivery methods, customer contact skills, safe driving techniques, and critical safe behaviors; developing accurate contractor service flex range (min/max); providing training on new scanner functions; and maintaining a positive relationship between the terminal management and driver. CSR Participant Manual, PI. Exh. 4:361. Robert Ostrov testified that “the customer service rides are an attempt to generally observe how the contractor is running his route, running his business, without drilling down on the speeifics[,]” such as how he turns off the vehicle, what he does with his keys, how he puts the scanner in his belt, how he enters the rear portion of the truck, etc. Ostrov Dep., pp. 244-245. The CSR Seminar document sets forth a number of items managers should observe during the ride, including the driver’s check-out and check-in routines; how the driver operates, parks, and enters and exits the vehicle; the driver’s delivery and pickup methods; and any delay time by the driver in performing the work. CSR Seminar, PL Exh. 4:451^462. For example, the CSR Seminar lists several things a manager should record when a driver makes a delivery: / The type of stop / The number of steps to reach point of delivery / Attracts immediate attention and walks at a direct steady pace / Looks for alternate delivery locations upon approach / Looks for proper Driver Release location upon approach / Introduces themselves and is pleasant/courteous to customers / Proper scanning procedures followed / Efficient in deciding when to driver release / Shows good judgment in indirect delivery / Leaves a delivery notice upon indirect delivery / Driver releases packages according to guidelines and common sense / Delivery notice is complete and legible / Efficient in handling 100 + lb. packages / Scan appropriate barcodes / Applies proper exception codes in timely fashion y Efficient in bulk stop methods yPuts address of next stop into the scanner on way back to van CSR Seminar, Pl. Exh. 4:457. Managers’ observations are used to make suggestions to the contractors to improve their work performance. A standard FedEx Customer Service Ride Worksheet allows the manager and driver to report general information about the drivers’ performance in the areas of package quality at delivery, quality assuranee, driver release, professional appearance (uniform and vehicle), customer courtesy, and service. During some customer service rides, FedEx managers also must complete a worksheet entitled, “Primary Service Area Analysis Worksheet,” to evaluate the contractor’s flex range and core zone. FedEx managers document the time the driver arrives and departs from each stop, the number of minutes at each stop, the number of minutes between stops, the last three digits of the driver’s odometer reading at each stop, and the approximate distance the driver must walk to pick up or deliver a package. CRL-555, at 3. FedEx presents evidence that managers vary in how they conduct customer service rides, the number of rides they perform each year, and what they review during the rides. In addition to customer service rides, managers should annually discuss with the driver his business plan. CRL-560, p. 3. In the annual business plan discussion, managers “document discussion areas, problems, solutions agreed upon, predetermined flex(es), and the expectations of an individual contractor.” CRL-560, p. 3. The documentation provides a record of the mutual commitments undertaken by FedEx and the driver. CRL-560, p. 3. The form provides spaces for the manager to document or compile the following information: the contractor’s total number of stops, packages, miles, and DOT hours of work; anticipated changes in the contractor’s primary service area; the condition and appearance of the contractor’s equipment; any deficiencies and expected correction dates; the number and type of complaints the contractor has received in the last twelve months; the contractor’s contingency plan in the event of a vehicle break-down; and any comments or questions the contractor might have. FedEx presents evidence that business discussions, customer service rides, and audits result in recommendations, not mandatory policies that must be followed. See, e.g., 2003 OPR 555 (2003), p. 2 (“Terminal management is to use [Contractor Customer Service Worksheet] as a consulting tool to provide recommendations to contractor.”); CSR Participant Manual (2005), PI. Exh. 4:321 (stating that managers are consultants and can make recommendations, but can’t require a contractor to follow methods, manner, or means of achieving desired results; the manager is to observe and make recommendations). As part of FedEx’s 2005 Document Reengineering Initiative, FedEx revised CRL-555 (formerly OPR 555) to make clear that feedback based on customer service rides constitutes a “recommendation,” not mandatory instruction, and that “[t]he contractor is solely responsible for exercising independent discretion and judgment to achieve business objectives” addressed by possible recommendations. 2005 CRL-555, p. 1. The customer service rides, audits, and resulting business discussions, however, are at times used to instruct contractors that they have violated the contract for having DNAs or customer complaints, improperly scanning or recording packages, missing pick-up windows, or not complying with safety regulations, among other service failures. Contractors sometimes are warned that violations might result in contract termination if not remedied. In fact, FedEx tracks information listing contractors in jeopardy of losing their contracts for having an at-fault accident, customer complaint, or missed pick-up. PL Exh. 4:187, Instructions for using worksheet “Contractors in Jeopardy.” Reconfiguration, Expansion, or Sale of Primary Service Area FedEx can reconfigure a contractor’s Primary Service Area upon five days’ written notice, unless the driver shows during that period that he can continue to service the area. FXHD OA, ¶ 6.2; FXG OA, ¶ 5.2 (“During such notice period, [FedEx] shall give Contractor the opportunity, using means satisfactory to [FedEx], to continue to provide in such Primary Service Area the level of service called for in this Agreement. In the event Contractor is not able to provide reasonable means to continue to service the Primary Service Area, [FedEx] may, in its sole discretion, reconfigure such area.”). The Operating Agreement requires compensation to the contractor if reconfiguration results in less customers or accounts, FXHD OA, ¶ 6.4, Addend. 5; FXG OA, ¶ 5.3; contractors may also be able to sell excess stops as an alternative to reconfiguration. Managers should review work area alignment twice a year to improve pick-up and delivery productivity and service through the restructuring of work areas. The goal is to provide each contractor with a full day’s work using the service flex range valuation. Management above the terminal level conducts what is called a “P & D Tune-up” about once a year to determine, in part, whether the terminal’s work areas are configured appropriately to maximize terminal capacity. The P & D Tune-up normally results in a recommendation to reconfigure contractors’ work areas. Drivers can expand their routes by acquiring additional service areas from FedEx or other contractors as they become available, subject to FedEx approval. The opportunity to acquire additional routes depends largely on the terminal. OA, ¶ 2.1 (“Contractor may, with the consent of [FedEx] and consistent with the capacity of the terminal serviced by Contractor, own and operate more than one vehicle, with any such additional vehicles to be driven by qualified operators employed by Contractor.”). FedEx restricts the maximum number of routes a contractor can own at any one terminal, but FedEx’s Chief Operating Officer or Chief Executive Officer can make exceptions to this rule. Until 2005, contractors were prohibited from obtaining a second route within their first year of contracting. Contractors with more than one route — multiple work area contractors — have a greater opportunity to profit from their routes than single work area contractors. The percentage of multiple work area contractors differs between terminals. Contractors have a proprietary interest in their routes and can sell them upon thirty days written notice to FedEx. The new driver assignee must be acceptable to FedEx as qualified to provide services under the Operating Agreement. FXHD OA, ¶ 15; FXG OA, ¶ 18 (allowing contractors to assign their rights and obligations to an approved replacement contractor). The assignee must meet the same minimum requirements and is subject to the same screening as contractors and temporary drivers. CRL-551, at 5 (“An individual applying to be a contractor/temporary driver must be prescreened and/or extensively reviewed or tested prior to completing the CDAS online application.”). A driver whose contract is terminated by FedEx for cause can’t assign his contractual rights to others. Length and Termination of Operating Agreements Contractors enter into Operating Agreements for an initial term of one, two, or three years (depending on the contractor’s election) that automatically renews for another one-year term if there is no notice of non-renewal. Non-renewal of the contract is permitted by either party upon thirty days written notice before the term expires. FXHD OA, ¶ 8.2; FXG OA, ¶ 11.2. The Operating Agreement allows termination: (1) by the parties’ mutual agreement; (2) if the contractor or his driver(s) engages in intentional misconduct or reckless or willful negligent operation of the vehicular equipment; (3) by either party “if the other party breaches or fails to perform the contractual obligations imposed by [the] Agreement[;]” (4) if FedEx stops doing business in all or part of the terminal service area or, as a result of decline in business, reduces operations in all or part of the service area; or (5) upon termination by the contractor upon thirty days’ written notice. FXHD OA, ¶ 9. 1; FXG OA, ¶ 12.1. FedEx sets forth procedures that managers should use if they decide to recommend termination of a “contractor who has breached or failed to perform ... contractual obligations, as evidenced by repeated customer complaints, failure to service his/her work area, integrity issues, unsafe driving, D.O.T. and/or maintenance violations, or other such problems.” RCRL-162, at 5, PI. Exh. 2:786. Managers should compile documentation of specific contract violations that would support a recommendation to terminate and use FedEx’s business discussion process to tell the contractor if his contract is in jeopardy. Managers then discuss the recommendation with the regional managing director, who also considers whether contract termination is appropriate, ie., whether the supporting documentation is complete, accurate, and legible; whether steps were taken to counsel, train, and otherwise help the contractor in overcoming the documented shortcomings; and how the contractor’s performance compares with other contractors at the same terminal. If the regional managing director agrees that contract termination is appropriate, the file is forwarded to Contractor Relations for more internal review. Contractor Relations independently reviews the submitted record for breaches of the Operating Agreement. Contractor Relations has at times declined to concur and denied a proposed termination if valid grounds for doing so under the Operating Agreement were lacking. If Contractor Relations concurs that termination is warranted, FedEx’s legal department reviews the file. After the internal review process is complete, the regional managing director notifies the senior manager/operations manager of the appropriate actions to take. RCRL-162, at 5-5, PI. Exh. 2:786-787; OP-162, PI. Exh. 3:7-8. The Operating Agreement contains a mandatory arbitration clause if the contractor asserts a claim for wrongful termination. FXHD OA, ¶ 9.3 and Addend. 7; FXG OA, ¶ 12.3. If the arbitrator decides that termination wasn’t within the terms of the Agreement, FedEx can either reinstate the contractor with damages from the date of termination through the date of reinstatement or, alternatively, terminate the contractor with damages from the date of termination through expiration of the contract term. FXG OA, ¶ 12.3(e); FXHD OA, Addend. 7, ¶ 5. II. Evidentiary Issues The parties have filed cross-motions for summary judgment on the issue of whether the Kansas plaintiffs are FedEx employees or independent contractors. Before the court can address the motions for summary judgment, it must resolve several evidentiary issues raised by the parties. First, FedEx argues that the Operating Agreement’s merger clause limits the court’s review of the evidence to the four corners of the agreement. Second, FedEx has moved to strike plaintiffs’ individualized proof submitted in support of their summary judgment motions. Finally, the plaintiffs have filed three motions to augment the record. A. Merger Clause FedEx bases its summary judgment motion on the terms in the Operating Agreement alone, contending that the merger clause in the Operating Agreement prevents the plaintiffs from relying on outside evidence, including FedEx policies and procedures. The merger provision states: “This Agreement, the Addenda hereto, and the Attachment to the Addenda, constitute the entire agreement and understanding between the parties.... This Agreement, the Addenda and Attachments shall not be modified, altered, changed or amended in any respect unless in writing and signed by both parties.” FXG OA, ¶ 13, FXHD OA, ¶ 10. FedEx Policy-007 similarly provides that the Operating Agreement and its addenda can’t be modified unless in writing signed by both parties. Policy-007 states that the Operating Agreement and addenda “set forth the mutual obligations and objectives of FedEx Ground and the independent contractor owner-operators and must be adhered to by all officers, managers, agents and employees of FedEx Ground.” The Operating Agreement doesn’t generally incorporate FedEx policies and procedures. FedEx reasons that the Operating Ag