Beware of the spreading Fedezon model
September 26, 2022
A big, ugly sea monster broke the ocean’s surface in April only to sink beneath the waves again in August. Hardly anyone took notice. They should have.
OK, it wasn’t the ocean. It was federal court in Washington state. And it wasn’t a sea monster, it was Amazon, the commercial, social and rapidly growing transportation monster.
In April with little fanfare, a California Amazon package delivery contractor filed suit against the company. The effort was doomed. Amazon claimed the complaint belonged in arbitration, not the courts. Last month, a federal court in Seattle agreed with Amazon. Now, the case – if the contractor decides to continue – will not be argued in a public court, but before an arbitrator and in private. It’s unlikely we’ll ever know the outcome. The monster slipped back underwater.
The contractor involved is not an independent owner-operator but a small company that hires and supervises local delivery drivers. Amazon’s package operations have grown exponentially in recent years.
So, should truckers care about a package delivery lawsuit?
You bet, and I’ll explain. But first a little background.
Early this summer, former FedEx Ground contractor Spencer Patton went public with complaints about the carrier. The media covered Patton’s Las Vegas gathering of fellow contractors and his threat to quit delivering on the day after Thanksgiving, America’s busiest shopping day. FedEx Ground wasn’t having any of it. They summarily dropped Patton’s contracts and kicked him off the bus. The FedEx Ground contractor insurrection Patton had been hinting at didn’t happen.
After that story appeared here on Land Line, a contractor for Amazon Logistics reached out to me with a similar story. I promised not to reveal his identity.
“Certainly, the same concerns expressed at FedEx have been expressed at Amazon, because no one’s gotten a pay raise and pay rate increase for anything for two years, despite the spiraling cost of tires and everything else,” the contractor said.
“Amazon controls everything. We hire the people, and we have the insurance and carry the risk of the vehicles, but everything else is dictated by Amazon,” the contractor explained. He emailed a document from the Washington lawsuit. It was something much discussed by Amazon contractors in private Facebook groups and other closed platforms, he explained.
Amazon’s Fli-Lo Falcon lawsuit
The lawsuit was brought by a California contractor called Fli-Lo Falcon LLC. I haven’t been able to find contact information for the company. Fli-Lo’s attorney did not respond to my request for information nor did Amazon. But while Fli-Lo’s case has sunk in the sea of arbitration secrecy, the public record of the lawsuit has not.
In it, Fli-Lo charged that Amazon “fraudulently” told potential contractors they “will own and operate independent businesses earning profits between $75,000 and $300,000 annually.” But according to the lawsuit, Amazon “uses its technology and control to limit DSPs’ capacity to earn the represented profits.”
DSP stands for Delivery Service Provider, an Amazon contractor.
The first 30 pages of the lawsuit document Amazon’s ultra-detailed control of contractor operations, including veto power over almost any decision a contractor might make. I’m sure some contractors have done well. I’m also sure many contractors have not. Either way, as a delivery contractor for Amazon, you’re about as independent as a dray horse in harness.
It has all served to highlight a noxious and growing anti-labor business model.
Much in common
Amazon and FedEx Ground have a lot in common. Let’s call it the Fedezon model. Both have outsourced not just delivery trucks and drivers but their supervision as well – an entire tier of corporate management. Contractors work for set rates yet absorb variable costs – higher fuel prices for example. Under restrictive contracts, they simply cannot increase income. They can only push drivers harder and pay them less.
So, why should truckers care?
This business model jumped from FedEx Ground to the much newer Amazon operations. The Fedezon model could spread further. It might not work for most big fleets, but it might for some. It could be particularly appealing should the traditional owner-operator model begin to erode as in California. We still don’t know how California intends to enforce AB5, but in one scenario individual owner-operators could end up as company drivers for small businesses under exclusive contract to big commercial or private carriers.
Even if a carrier simply leases a former owner-operator’s truck but pays him as an employee, that driver will probably lose an important owner-operator prerogative, the right to refuse a load.
The unspoken reason for the business model
As is now obvious, becoming a contractor for Amazon or FedEx Ground is a gamble. It’s like being a middle manager with all the constraints of working for a big corporation. Sure, you have a corporate budget – but with one big difference. Anything you spend over that budget comes directly out of your salary.
It’s important to realize that while advocates praise the Fedezon model for its efficiency and the opportunity it provides for brave entrepreneurs, it was created for two overriding reasons – reasons nobody talks about.
The Fedezon model exists generally to hold driver pay down and specifically to keep unions out. If a union organizes a contractor’s drivers, that contractor will find itself without a contract. Period.
One last thought: Amazon recently launched a program to help contractor employees with education, including college. Yes, it’s a great benefit, but perhaps with an unintended message: “You need an education to earn the fair pay you’re not going to get here.”
In my personal opinion for the sake of all working people the Fedezon model should be outlawed. LL