FedEx: Action by subcontractors could constitute breach of contract


FedEx, in a strong response to a group of FedEx Ground contractors’ decision to seek financial assistance from the carrier, warned that any collective bargaining activity would put them in breach of contract with the main carrier, even if the group seeks to create a Committee representative.

In a letter sent to FedEx Ground’s 6,000 contractors on Wednesday, the unit’s president and CEO, John Smith, said the company would not in any way negotiate “agreements or financial terms” with a group “claiming to represent a collective collection of service-providing companies”. Smith also said the group is making “general financial requests” while setting a November 25 deadline to resolve them, just as peak season begins.

“The service provider model was built around the recognition that each business has unique and distinct entrepreneurial characteristics and objectives, and therefore each agreement is – and will, without exception, continue to be – negotiated individually,” Smith wrote. . “Furthermore, any effort by service providers to negotiate financial terms as a group constitutes a breach of contract with FedEx Ground.”

Smith added that FedEx expects each contractor to “honour their obligation to provide service.”

Beyond that, Smith said the company recognizes the difficult market conditions and cost pressures faced by contractors, and remains committed to discussing these with individual operators.

“We are committed to listening, reviewing relevant data about your business, and engaging in productive business-to-business dialogue,” Smith said. “We believe this is the most effective path to creating ongoing opportunities for success and respecting the fact that each of you owns and runs your own business.”

A FedEx spokesperson added that the company believes individual negotiations are the only way to address the unique characteristics of each business, including the geography of service areas. “FedEx Ground teams across the network are continuing these productive B2B discussions,” she said.

The average income for ground contractors in 2021 was $2.3 million, and more than half had been with the company for five years or more, she said. “They are growing and scaling their businesses alongside FedEx Ground as we jointly explore the opportunities presented by the rapid growth of e-commerce,” she said.

Smith also pushed back against claims by Spencer Patton, who is leading the contractors’ revolt. For one thing, he said Patton’s estimate that Sunday delivery was a $500 million drag on FedEx revenue was “inaccurate.” The company announced late Thursday that it was suspending Sunday delivery in some less dense markets, a day after Patton made one of his group’s demands.

“We have been evaluating the effectiveness and market demand for these operations for several months, and it was after this thorough analysis that FedEx Ground announced the suspension of Sunday delivery operations in certain markets,” Smith said.

He noted that ground service levels have improved this year, particularly over the past three months, a fact confirmed by industry experts who spoke to Multichannel Merchant.

In a letter last week to Smith and the rest of FedEx leadership, Patton demanded a 50-cent-per-stop raise for FedEx Ground delivery contractors, to continue for 12 months before reassessment, and an additional 20 cents per mile for transportation deliveries online, with one-off journeys benefiting from a 10% increase. Patton cited the company’s recent earnings as well as the economic conditions faced by entrepreneurs, as well as the significant investments made by many to prepare for the projected fourth quarter volume that did not materialize.

patton said Entrepreneur Expo + Partya trade show hosted by his company and sponsored by contractor service providers attracts more than half of FedEx Ground contractors in the United States. The event is also aimed at Amazon Delivery Service Providers (DSPs) who own their own package handling business for the e-commerce giant.

Patton owns both Patton Logistics, a major Nashville-based FedEx Ground contractor, as well as Route Consultant, which advises current and potential contractors for FedEx and Amazon.

At the fourth annual event, to be held in Las Vegas, a process will begin to select a committee of 10 entrepreneurs in September. Voters will agree the group can speak for them in its dealings with FedEx Ground — a scenario Smith has previously said is a no-starter.

“In order to vote for committee members, people will check a box to certify that the committee has the authority to speak on their behalf,” Patton said. He added that his group will respond to Smith’s letter next week.


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