FedEx Ground puts more than 200 drivers out of work in contractor shutdown

It’s like a 4-ton elephant sitting on a 1-ounce mouse to send a message to all the other mice.

In a first-class example of big carriers acting badly, FedEx Ground shut down one of its delivery contractors, putting as many as 225 drivers out of work.

On Friday, Aug. 26, FedEx Ground pulled the plug on routes run by at least four contracting companies. All are operated by Spencer Patton, an entrepreneur based in Brentwood, Tenn. Earlier the same day, the suburban Pittsburgh-based FedEx subsidiary filed a lawsuit against Patton, who has emerged as the default leader of some contractors unhappy with FedEx Ground for a variety of reasons.

A spokesman for Patton said Patton and his staff had spent Friday and Saturday trying to arrange new employment for the laid-off drivers.

FedEx Ground is a $60 billion company. Patton’s worth is in the mere low millions. More than 60,000 drivers in FedEx Ground uniforms work for the company’s 6,000 contractors. Patton’s routes comprise less than 0.5% of its network, according to FedEx Ground.

FedEx Ground acted after Patton threatened in an Aug. 20 speech to shut down his operations on the day after Thanksgiving. In the speech to other FedEx contractors at a Las Vegas conference, Patton hinted that other contractors should also consider refusing to deliver that day, Nov. 25. Often called Black Friday, Patton called it Purple Friday, a reference to the color that differentiates FedEx Ground’s logo from other FedEx divisions.

Patton may have overplayed his hand. FedEx Ground probably considered his speech an ultimatum, which in effect it was. In any case, the threat and the contractors’ issue became news. Patton won lots of favorable publicity for the contractors’ cause – and for himself – in national business media.

Eroded ‘goodwill’

That clearly distressed FedEx Ground. In their lawsuit, FedEx Ground claims “this unfavorable press has the tendency to create concerns at FXG’s customers and to erode FXG’s goodwill among its ISP (Independent Service Provider, a local route contractor) and TSP (Transportation Service Provider, a linehaul contractor) network as well as in the market.”

Goodwill? Really?

In its fearsome display of corporate muscle, FedEx Ground appears to be sending a message, and it’s not about goodwill. It feels more like a company that treats its employees poorly and is then confronted by a union organizing effort. The first thing they do is fire the leaders. That lets everyone know what can happen to union supporters. It’s illegal, but companies get away with it.

FedEx Ground’s action appears to have a similar goal: to get rid of an individual troublemaker and to show its contractors who’s the boss. And since the giant company is dealing with contractors and not employees, there’s nothing illegal about it.

The message simply stated: Be afraid.

It appears to be working. After FXG sued Patton and pulled his routes on Friday, rumors circulated that other contractors would refuse to cover Patton’s routes on Monday morning. If some did, it didn’t make news anywhere. Maybe even worse for Patton, now that he’s out of FedEx Ground and Purple Friday is no longer a threat, he may no longer be able to generate the kind of press coverage that got FedEx Ground’s attention in the first place.

Not exactly a hero

To be honest, I don’t like FedEx Ground’s business model. I didn’t like FedEx Ground’s predecessor RPS (Roadway Package System), which established the FedEx Ground business model in 1984. Given a choice, I always use UPS rather than FedEx Ground.

On the other hand, I only know about Spencer Patton what I learned online and watching that Las Vegas speech. Whatever else he might be, Patton is – or was – an enthusiastic participant in the FedEx Ground business model. I don’t know what his drivers earn or how they are treated.

But even if Patton is a sweet and generous guy, I doubt his drivers earn the value they provide for doing the actual, physical work. That’s certainly the case for most FedEx Ground drivers. It’s built into the FedEx Ground business model that Patton himself praises to the heavens.

Take the FedEx Ground guy who delivered to my home office today. The young man in a FedEx Ground uniform said he gets paid by the day and works 10-hour days, 7 a.m. to 5 p.m. Sometimes he works until 8 p.m. without additional pay. By contrast, experienced UPS package drivers can earn $40 an hour with time-an-a-half for overtime. Many UPS drivers famously earn more than $100,000 a year. Linehaul drivers earn even more.

Yet despite the wide difference in driver pay, UPS outperforms FedEx Ground. Last year, for example, holiday season on-time performance was 85% for FedEx Ground while UPS achieved 95%. According to a number of shipping information websites, UPS rates are generally comparable to FedEx Ground’s.

At this point, things don’t look good for Patton, at least from the outside, but I wouldn’t count him out just yet. As FedEx Ground says in its lawsuit, “Mr. Patton is a sophisticated investor and entrepreneur.” And even if they’re not prepared to walk the plank with him, many FedEx Ground contractors appear to support him.

Meanwhile, FedEx Ground’s mishandling of contractor issues and trouncing of Spencer Patton clearly have eroded “FedEx Ground’s goodwill among its independent service providers and network as well as in the market” far more than anything Patton has said or done. LL