Contract analysis

I. Executive Summary The purpose of this memorandum is to analyze whether the approximately 1,187 delivery drivers that Stonefield Logistics Group Inc. ("SLG" or the "Company") has classified as independent contractors pursuant to Independent Contractor Operating Agreements ("ICOAs") would likely be deemed employees under the Fair Labor Standards Act's ("FLSA") "economic reality" test. This analysis is undertaken in

II. Background A. Company Overview Stonefield Logistics Group Inc. is a Delaware-incorporated, Texas-headquartered transportation and logistics company specializing in three principal service lines: last-mile delivery, regional freight, and white-glove delivery services. The Company was founded in 2011 by Gregory Stonefield and originally operated as a single-hub regional delivery provider servicing the Dallas–Fort W

1. The degree of control exercised by the alleged employer over the manner in which the work is performed;

2. The worker's opportunity for profit or loss depending on his or her managerial skill;

3. The worker's investment in equipment or materials required for the work, or employment of helpers;

4. The degree of skill required for the work;

5. The permanence of the working relationship; and

6. The extent to which the service rendered is an integral part of the alleged employer's business. See Hopkins, 545 F.3d at 343; Brock, 814 F.2d at 1043; Thibault v. BellSouth Telecomms., Inc., 612 F.3d 843, 845–46 (5th Cir. 2010). No single factor is dispositive, and the ultimate determination rests on the totality of the circumstances. Hopkins, 545 F.3d at 343. The burden rests on the plaintiff to demonstrate the

III. Factor-by-Factor Analysis A. Factor 1: Degree of Control Exercised by Stonefield The degree of control exercised by the alleged employer over the manner in which the worker performs the services is the most frequently cited factor in the economic reality analysis. The Fifth Circuit has emphasized that this inquiry focuses not only on whether the employer actually exercises control, but also on whether the employ

1. Control Indicators Favoring Employee Status. Our review of the ICOAs, RouteSync dispatch data, GPS telematics records, and management interviews reveals a substantial degree of control exercised by SLG over its drivers. The following indicators are particularly significant: Route Assignment via RouteSync. SLG's proprietary dispatch platform, RouteSync, assigns daily delivery routes to drivers with limited driver d

2. Control Indicators Favoring Independent Contractor Status. In fairness, several aspects of the arrangement provide some support for independent contractor classification on the control factor: Drivers retain the ability to decline individual delivery assignments, subject to the 85% minimum acceptance rate. While this discretion is constrained, it is not entirely illusory — a driver who maintains an acceptance rate

3. Risk Assessment — Factor 1. Rating: Weighs in favor of employee status (high risk). The degree of control SLG exercises over its delivery drivers is substantial and pervasive. The combination of centralized route assignment through RouteSync, mandatory delivery windows, GPS-based real-time monitoring, uniform and branding requirements, mandatory training, performance-metric consequences, unilateral rate-setting, a

1. Indicators Favoring Employee Status. Several aspects of SLG's arrangement with its drivers limit the drivers' opportunity for profit or loss in ways that suggest employment rather than independent contracting: Drivers are paid a fixed per-delivery rate set unilaterally by SLG. They have no ability to negotiate rates, charge premiums for difficult or expedited deliveries, or develop independent pricing structures.

2. Indicators Favoring Independent Contractor Status. The opportunity-for-profit-or-loss factor provides the strongest available argument for SLG's classification position. Several aspects of the arrangement suggest some degree of entrepreneurial opportunity: Drivers bear the risk of significant vehicle expenses, including fuel, maintenance, insurance, depreciation, and repairs. These costs are not trivial. Based on

3. Risk Assessment — Factor 2. Rating: Mixed; slight lean toward independent contractor status (moderate risk). The opportunity for profit or loss is the strongest factor supporting SLG's classification position, and it is the one on which the defense should focus its evidentiary development. The drivers' bearing of substantial vehicle costs and the ability to work for multiple delivery platforms demonstrate some ent

1. Indicators Favoring Independent Contractor Status. The most significant indicator favoring independent contractor status on this factor is the drivers' investment in their own vehicles. The ICOAs require drivers to provide their own cargo van or box truck (model year 2015 or newer, passed SLG safety inspection), and drivers bear all vehicle-related costs. Based on market data and SLG's vehicle specification requir

2. Indicators Favoring Employee Status. Notwithstanding the drivers' vehicle investment, several considerations cut against SLG's position on this factor: SLG provides key operational equipment necessary for the performance of the work, including handheld barcode scanners, RouteSync mobile application credentials and supporting software infrastructure, and GPS telematics hardware. These items are furnished at no cost

3. Risk Assessment — Factor 3. Rating: Slight lean toward independent contractor status (moderate risk). The driver's vehicle investment is real and significant, and it provides a meaningful argument for independent contractor status. This is not a case where the alleged employer provides all tools and equipment; the drivers' personal financial commitment to their vehicles is substantial and distinguishes this case f

1. Analysis. Last-mile delivery driving, as performed by SLG's drivers, does not require specialized skills, advanced training, or professional certifications beyond a valid driver's license and the ability to safely operate a cargo van or box truck. No Commercial Driver's License ("CDL") is required for the vehicle types used by SLG's drivers, as the gross vehicle weight ratings of qualifying vehicles fall below the

2. Risk Assessment — Factor 4. Rating: Neutral to slight lean toward employee status (low-moderate risk). The relatively low skill level required for last-mile delivery driving and SLG's provision of substantial training both suggest an employment relationship. However, this factor is generally considered less important in the overall economic reality analysis and is unlikely to be outcome-determinative in either dir

1. Indicators Favoring Employee Status. Named plaintiff Marcus Delano worked for SLG for approximately 3.5 years, from March 2021 through September 2024. This is a lengthy, continuous engagement that is far more consistent with an employment relationship than with the episodic, project-based engagements characteristic of independent contracting. Delano's experience is not atypical. While we are still conducting a com

2. Indicators Favoring Independent Contractor Status. The ICOAs are terminable at will by either party without cause, which provides some theoretical flexibility and is not inconsistent with independent contracting arrangements that may also be terminable at will. Drivers are technically free to cease providing services at any time without contractual penalty (other than the non-compete restriction), and some drivers

3. Risk Assessment — Factor 5. Rating: Weighs in favor of employee status (high risk). The long average tenure, at-will but continuous nature of the relationship, non-compete restrictions, and ongoing performance management structure all suggest a permanent working relationship consistent with employment. The Fifth Circuit has repeatedly found that relationships extending over multiple years with consistent, full-tim

1. Analysis. Stonefield Logistics Group Inc. is a last-mile delivery, regional freight, and white-glove delivery company. Delivery driving is not a peripheral or ancillary function of SLG's business — it is the core, revenue-generating activity that defines the Company's business model and sustains its operations. SLG exists to deliver packages and freight from distribution hubs to end customers. Every dollar of its

2. Risk Assessment — Factor 6. Rating: Weighs strongly in favor of employee status (high risk). This factor is the most unfavorable for SLG's classification position and offers the least room for counterargument. Delivery driving is indisputably integral to SLG's business, and the Fifth Circuit consistently finds this factor in favor of employee status when the workers perform the core function of the company's busin

IV. Totality of the Circumstances — Overall Risk Assessment A. Summary of Factor Ratings The following table summarizes our assessment of each factor in the six-part economic reality test: B. Overall Risk Rating Based on the totality of the circumstances, we assess the overall risk that a court would find SLG's drivers to be employees under the FLSA economic reality test as moderate-to-high. Three of the six factors