BOSTON (Legal Newsline) - Massachusetts Attorney General Martha Coakley announced on Wednesday that her office has recovered more than $3 million for workers in a settlement with FedEx Ground.

FedEx Ground allegedly misclassified drivers as independent contractors, resulting in underpayment to Massachusetts in payroll taxes, worker's compensation and unemployment insurance.

"We have made enforcement against employer misclassification a priority because employers who misclassify workers are gaining an unfair advantage over their competitors and unfairly depriving the Commonwealth of tax and other revenues," Coakley said.

FedEx Ground was first cited by the Attorney General's Office in 2007 for allegedly violating the state's Independent Contractor Law by failing to provide a proper pay stub or workers' compensation, and by neglecting to deduct and withhold state income taxes and not paying correct overtime compensation to all drivers.

FedEx Ground appealed the citation to the Division of Administrative Law Appeals. Coakley then alleged that FedEx Ground's misclassification of employees had resulted in significant underpayments to the Department of Revenue, Division of Industrial Accidents and Department of Unemployment Assistance.

Under terms of the settlement, FedEx Ground, which denies liability, has agreed to pay more than $3 million, including the significant underpayments, back to Massachusetts' general fund. Money will also go to the 13 drivers named in the original citation.

A separate suit against FedEx Ground brought by drivers in Massachusetts is pending and is not affected by this settlement.