FedEx Corp. said in a regulatory filing Friday with the Securities and Exchange Commission that the company was notified that the Internal Revenue Service was dropping its investigation into whether the company should have paid employment tax for the drivers of FedEx Ground service in 2002, a Moon-based subsidiary that the company runs using drivers it classifies as independent contractors. The IRS is still auditing whether the those taxes should have been in paid in 2004 through 2008.

The IRS inquiry is one of a number of legal challenges facing the company regarding the company's use of independent contractors. In California, FedEx had to change the model to one in which contractors could employ drivers for multiple routes, but the single-route driver system was eliminated.

The company also settled a lawsuit in December with independent drivers who handled single routes in California that cost it $26.8 million.

The drivers had argued they were employees of the company since they had to wear company uniforms and the company assigned their routes, but they had to provide their own trucks and did not receive any benefits including medical benefits or workers compensation.

In a statement by the company on the IRS Audit Team closing the 2002 investigation without a finding against FedEx, spokesman Maury Lane said "FedEx Ground's independent contractor model has been tremendously successful for customers, contractors and the company for more than 20 years, and we believe the IRS decision provides further vindication of the model. While similar issues are still under audit for calendar years 2004 through 2008, we believe the Audit Team should reach the same conclusion on these issues for each of those years, as well."

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