Potential financial disaster looming for FedEx?

B

BR549

OutFront
Mutiny on the FedEx Truck

Elizabeth MacDonald, 09.19.05

Is a package deliverer an independent contractor or an employee?A truckload of money is at stake.
FedEx found a smart way to compete with United Parcel Service in ground delivery. In lieu of hourly truck drivers, it would use independent contractors in its FedEx Ground division, paid for results but responsible for their own vehicles, fuel and overhead. In that way they would be like the milkmen of yore, or like many a RE/Max Realtor, Allstate insurance salesman or newspaper deliverer of today.

Or maybe not so smart. After accepting FedEx contracts, contractor-drivers have filed 28 lawsuits in 22 states, most seeking class action status, covering as many as 7,000 current and former drivers, plaintiff lawyers say. Arguing they're not given full autonomy, they're demanding expense reimbursement, overtime and benefits. If FedEx, which earned $1.4 billion in fiscal 2005, has to classify all 14,000 ground-unit drivers as employees, the pretax hit could be in the neighborhood of $1.4 billion, taken over several periods, figures Brian Hamilton, chief executive of ProfitCents, a financial research company. And that's only for payroll taxes, health insurance, workers' comp, gas and overtime. The figure doesn't include things like retirement benefits and paid vacations. FedEx faces "a significant financial risk," but investors wouldn't know that because it has disclosed "the bare minimum," Hamilton adds.

Aren't these litigious drivers--as many as half the total number of FedEx contractor-drivers in the U.S., Puerto Rico and Canada--asking to have their cake after already having eaten it? Yes and no. Say an indie gets $80,000 for running a 120-mile-a-day route for 250 days a year. Out of this sum he'd spend an estimated $40,000 on vehicle insurance, gas, leasing costs, health insurance, retirement and Social Security and Medicare taxes. The $80,000 income in this hypothetical (from FedEx) sounds pretty good, but it's equal to a salaried job of only $40,000 or so, versus $70,000 for a UPS driver. Thus the drivers say they have to work 12 hours a day to make money.

Many of the drivers say they want a payout comparable to what their salaried employee counterparts get at FedEx. If it weren't for the dispute, this would be a success story for FedEx. Since FedEx acquired the ground delivery service (that is, delivering packages that were never in an airplane) in 1998, sales have more than doubled to $4.7 billion in annual revenue. The flood of litigation came after a superior court judge in California issued an interim ruling last year that FedEx should reclassify these contractors as employees. State labor boards in New Jersey and Montana have made similar findings.

Robert McDaniel, a Concord, N.H. attorney representing the drivers in one of the lawsuits, points to telltale features of an employer/employee relationship: FedEx tells them how to operate their trucks and deliver packages, makes them wear uniforms with company logos, has them report daily to FedEx hubs and fires them for failing to follow company policies. FedEx counters that the drivers aren't employees because they can sell their routes, don't have specific start and finish times and "have tremendous opportunities to grow their own businesses," says FedEx Ground spokesman Perry Colosimo. "We've got several hundred contractors who grossed over a quarter-million dollars last year." Colosimo also says FedEx's disclosures are appropriate. Robert Ostrov, FedEx Ground's vice president of contractor relations, downplays the situation, saying only 36 current drivers have filed suit seeking class action status.

Some drivers claim FedEx is retaliating against them for suing. Just 8 of the 29 drivers who joined a New Hampshire suit are still working at FedEx. Those who left say FedEx harassed, intimidated or fired them in response to the suit. Ostrov says he doesn't believe FedEx "is harassing" these contractors, adding "we wouldn't tolerate any inappropriate behavior."
 

FlyBoeingJets

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BR549 said:
Doubt what?
The answer to your question, "Potential financial disaster looming for FedEx?"

You know, the title to your thread.
 

klhoard

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BR549 said:
. . .<snip>. . ."We've got several hundred contractors who grossed over a quarter-million dollars last year." . . . <snip>.. .
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I guess the pilots are the underpaid employees now, eh?? . . . .
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Wouldn't it be a shame if the Teamsters started sending ballots to all of these "contractors". . .
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~~~^~~~

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FedEx could always create an alter ego truck driving subsidiary. Just ask the guys at Mountain Air Cargo....
 

incubus

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in general, the middle/working class worker loses and the corporation wins.
 

wheelsup

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BR549 said:
versus $70,000 for a UPS driver
WTF, over? The ups drivers make $70k a year? What's the typical lifestyle? M-F 8 to 5 or are there working 70 hours a week for that? I didn't realize the truckers made so much $$...I worked for UPS as a ramper and made $8.50/hr.

~wheelsup
 

atpcliff

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Hi!

I know a guy who drives for FedEx. He's not very happy with how the company treats him.

Cliff
GRB
 

klhoard

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atpcliff said:
Hi!

I know a guy who drives for FedEx. He's not very happy with how the company treats him.

Cliff
GRB
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It's the pilot's fault. . .
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regionaltard

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The RJ's did it.........
 

Dizel8

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Huh?
The Presidents fault!
 
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Deregulation.

CE

(First post!):p
 

AGuyThatFlys

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It's high fuel prices.
 

AlbieF15

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..okay, okay...

Seriously...in the past the threat during work actions was Fred would "shut down the company and make it a trucking firm..." Well...seems to me that perhaps our GROUND based unit may not be as profitable as they think it might, especially if all these truckers ARE FedEx employees. Guys need to stew on this when they get the "red letters" or other management scare tactics. Unlike 1998, there ARE other p1ssed off work groups right now, and there are about to be a LOT of folks upset at rising health care, shrinking retirements, and outsourcing. If anyones has looked, the issues at heart of these negotiations FDX are scope, healthcare, retirement, and work rules...not compensation. I think the other folks on the property can relate to all of those items...
 

~~~^~~~

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Fed Ex's biggest problem is that its service is more expensive and not nearly as good as UPS. Fed Ex has been playing "me too" for a long time now. UPS bought Mail Boxes Etc and now has a grip on those of us with small business accounts. The Kinkos stores are too big and too diversified to make handy (meaning - really quick) shipping centers.

The worst part of Fed Ex is their ground staff. The people at the Fed Ex shipping centers are too focused on their internal procedures to care about customers' needs. The only small business people I know who are still using Fed Ex are those who just have not got the situational awareness to realize that UPS is a better, cheaper, product. For example lets say your Fed Ex shipment gets to the local distribution center early - will they deliver it early like UPS does? NOOOO, they hold it. Can you pick it up? Nooo. Could you pay more and go pick it up, Nooo. Once your stuff is given to Fed Ex for shipment they treat it like it is their stuff. Can we use our discounts with Fed Ex? Nooo. Hey, I just carried a Fed Ex pilot to Memphis - can we jumpseat on Fed Ex? Nooooo! Fed Ex should hire David Spade to do their advertisements.

At least Fed Ex employees make ASA's gate agents in Atlanta look like Dale Carnegie course graduates in comparison.

If Fed Ex loses the Postal contract, I think they might get into trouble. There is nothing so special about Fed Ex to warrant shipping rates 30% to 40% above UPS. Beyond that, did I mention that their service sucks?
 
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