Anyone who has followed the shenanigans at FedEx Ground and Home Delivery has been led to believe that FedEx has changed their ways. Gone in most states is the original Independent Contractor (IC) model they used while building their brand…replaced by the new and improved Independent Service Provider (ISP) model they claim will solve the shortcomings of the IC program.
But what Fred Smith and FedEx have really done is hornswoggle enough judges, lawyers, and state and federal agencies into believing they’ve changed. And while some things have changed, the ISP model still retains the same underlying flaws that poisoned the Independent Contractor well; the FedEx-contractor relationship is one of exclusivity, and FedEx just doesn’t pay contracted businesses enough for them to pay their drivers overtime or provide any kind of health insurance or paid time-off benefits. And that much control makes FedEx the 800 pound gorilla in the room, and they don’t hesitate to throw their weight around fast and free.
FedEx has led many to believe that in their fancy new ISP model, they have eliminated doing business with contractors and now they contract only with businesses who have their own employees. What does that mean and how did they accomplish this changeover from contractors to businesses? First in 2011, they announced that all contractors must be, if they weren’t already, an “S” corporation (no LLC corporations either) if they wished to continue contracting with FedEx…and vwehla!…FedEx creates their new business partners from the ashes of their previous contractors. Same contractors, just labeled differently for tax purposes. FedEx also mandates that these businesses are not permitted to use their own contractors to make deliveries…no 1099’s allowed!…W-2 employees only.
As FedEx was legislating into existence these new business partners, they also just happened to announce the daily service requirements these businesses would be expected to provide prior to ISP implementation. Businesses would be obligated to agree to service a minimum of 500 stops per day, roughly 3-4 routes per day. It didn’t take a mathematician to see the wave that was about to crash on the heads of the single route contractors. Some would have to go…and the longer a contractor who was unable or unwilling to meet FedEx requirements waited, the less his route could be worth in a potential sale. To make matters worse, if a contractor was unable to make a deal for his route, he was simply finished. FedEx took back the route and re-assigned it to another service provider with no break-up fee provided to the now former contractor.
As part of the new ISP model, FedEx allows future business partners the opportunity to negotiate the rates of their service. Which is to say, FedEx contests every part of any potential agreement, forcing the future service provider to pick what elements of the agreement to actually negotiate since there is no possible scenario where FedEx compromises on ALL obligations stated in the contract. In addition, a business owner in the new ISP model would be required to sign a clause that prohibits them from suing FedEx for possible future disputes that might arise from the ISP agreement. Simply, they covered their asses…a lesson learned from the highly litigated IC model.
FedEx recently announced to their business partners that as of 2021, they will be required to own both the Ground and Home Delivery services in the zip codes they contract to service. Once again, FedEx is interfering in how their partners businesses are run, just as in the past IC model. They’re forcing another wave of route consolidations which will only drive further the current wedge that exists between Home Delivery and Ground service providers (and their drivers). This time the stakes are higher however, and a service provider who is unable to accommodate such changes has much more to lose than pre-ISP consolidations.
This whole FedEx cluster-covfefe leads to one last question; how much longer do FedEx Express employee drivers have before FedEx decides to hand the express package delivery service over to its Independent Service Provider businesses?…They’ve already changed the Uniform and truck colors of Ground and Home Delivery to match those of their FedEx Express service.
Wanna bet they’re at least talking about it?…