Ground Contractor Issues Relating to Express

Discussion in 'FedEx Discussions' started by Ricochet1a, Jun 11, 2009.

  1. Ricochet1a

    Ricochet1a New Member

    The FedEx use of “independent contractor” is another example of their stretching the law to the limits of possible credibility. I’m going to get just a little technical, so that I can better illustrate the fallacious use of independent contractor by FedEx Ground.

    An Independent Contractor is legally defined as:
    “A person who contracts with another to do something for him but who is not controlled by the other nor subject to the other’s right of control with respect to his physical conduct on the performance of the undertaking. He may or may not be an agent”.

    I’m not going to cause you to fall asleep taking about what an agent is, but for our purposes all package deliveries are made by an agent of the principle (FedEx).

    To get an idea of independent contractor, think of a company contracting with an electrician to do some work that will last a few weeks and then the work is completed. The contracting party doesn’t tell the electrician how to do their job, or how to run their business (ACME Electricians). It is simply a promise for a promise (work in exchange for payment). Courts use a seven question test to determine if a person falls under the category of independent contractor, or employee.

    1) How much control can the employer exercise over the details of the work? (the more control, the stronger the status becomes employee).

    2) Is the employed person engaged in an occupation or business distinct from that of the employer? (An electrician is distinct from a company doing retail sales out of a strip mall)

    3) Is the work usually done under the employer’s direction, or is it done by a specialist without supervision? (The retail store owner isn’t going to be directing the electrician, the electrician operates without supervision).

    4). Does the employer supply the tools at the place of work? (The electrician brings their own tools).

    5) For how long is the person hired or retained? (The electrician has a short term relationship with the retail store).

    6) What is the method of payment? Is it by time period or at the completion of the job? (The electrician is paid for successful completion of the agreed work, how long it take the electrician to complete the job is irrelevant to payment – within limits).

    7) What is the degree of skill required to do whatever it is the person was hired or retained to do? (The electrician must be licensed and requires a substantial amount of skill).

    Now the law also states that “truck drivers” that own their own equipment and hire out on an ad hoc basis are independent contractors. This is the tiny crack that FedEx is inappropriately using for Ground. Ground drivers don’t do ad hoc work for FedEx; it is an ongoing relationship (employer-employee).

    The courts usually consider all seven of the questions and determine employee/independent contractor based upon the preponderance of the facts in one direction or another.

    Let’s analyze FedEx Ground.

    1) FedEx has a very high degree control over the drivers. The drivers wear FedEx clothing; use FedEx computers and information processing techniques. That electrician wears their own clothing, with their own company name (ACME Electricians). By the first test, the drivers are clearly employees.

    2) The delivery drivers are engaged in the exact same business as FedEx Ground, they are both elements of package delivery. If that retail store had a contract delivery service, those drivers could be classified as independent contractors under this test. Ground drivers are the logical extension of FedEx Ground’s service, therefore are employees under this test.

    3) The Ground drivers have a fair degree of supervision in the performance of their work. They have meetings on a regular basis regarding the performance of the deliveries, and have a set of guidelines issued by FedEx regarding how to perform the work. This test isn’t as easy to define as the previous two, but the preponderance of the test supports classification as an employee.

    4) Ground Drivers (the route “owners”) have technical ownership of the vehicles that they use. The “tools” are owned by the owner operators, thus satisfying the test for independent contractor. This is the PRIMARY (and about only) test that FedEx passes regarding the employee/independent contractor evaluation. HOWEVER… The trucks MUST be painted in FedEx colors. The “owners” cannot paint their trucks as “ACME Package Delivery Service”. This is against the intent of the independent contractor model.

    5) The Ground drivers can literally work for years driving the same route. There is no “temporary” nature to their work. They are clearly employees by this test.

    6) Ground pays on the basis of pieces delivered, not hours worked. The owner/operators may pay their “helpers” an hourly rate, but FedEx pays based upon pieces, not hours billed to the owner operator. Under this test, the work can be classified as independent contractor. This is a subversion of the intent of this test, since we all know that for a given route, an expectation of time required to complete delivery of all pieces can be made.

    7) Making deliveries is considered an unskilled occupation. No advanced training is neither required; nor any specific state licensing (electrician, real estate agent, RN, etc.). The delivery driver is clearly an employee under this test.

    Only on two of the seven tests, do Ground drivers fall on the side of the independent contractor model. The courts SHOULD’VE shut this down from the beginning, since it requires a preponderance of the tests to support classification as independent contractor status. This is why the Ground drivers will eventually be classified as employees. The issue is working its way through the courts and eventually, the classification will be mandated to that of employee.

    So why did FedEx choose to try this game? To keep the Teamsters out of Ground, simple as that. Independent contractors cannot unionize against the party they are contracting for (FedEx). The “helpers” could conceivably unionize against the owner-operators that hire the helpers. But what is the use of having a union of a handful of drivers? An additional benefit for FedEx is that they were able to get pieces delivered for less that they pay for deliveries on the Express side. They save about 25-30% on labor costs, by going through this convoluted measure. Don’t try to get between Fred and a dollar, he’ll run you down to get that dollar.

    I apologize for the length of this post, but it is better to get the legalisms out so that everyone can see the issues, without just talking about the issue without getting into details or understanding the complete argument for and against.
  2. Ricochet1a

    Ricochet1a New Member

    Answering “bbsam’s” question from another thread… It is virtually impossible to move from an employee-employer model, to an independent contractor-employer model. FedEx would have to lay-off every Courier, then attempt to contract for “independent contractors”. The employees would have a slam dunk class action suit against FedEx. The courts STRONGLY favor the employer-employee relationship, since the legal protections for employees are considerably greater than for independent contractors. This would be a non-starter for FedEx. This is why Express is going to move to a pre-dominant part-time Courier work force if they can successfully avoid unionization in the next months. The part-timers are still classified as employees, but would be reluctant to unionize, and usually will work for lower wages and benefits that a full-time career employee.

    As far as UPS Teamsters honoring a strike by potential FedEx Express Teamsters… That is a legitimate question. I’ve glanced over the master agreement, but haven’t cut it apart enough to be able to make what I’d call a definitive call on what the Teamsters would do. Most contracts have a “no-strike clause” within them, which prohibits the union from striking against the principle (UPS in this case) for the period the contract is in force. So at first look, the Teamsters wouldn’t call for a simultaneous strike against UPS. The Teamsters would have no “beef” against UPS, so striking against UPS wouldn’t really make sense.

    There is another question that is more interesting. Would the pilots of FedEx (who are unionized) honor the picket line of a potential Courier/RTD strike? Short answer is no or doubtful.

    The pilots actually DON’T want the Couriers and RTD’s to unionize. They see Couriers/RTD as low-skill, high turnover employees that have a low commitment to the company. They also see FedEx as a “zero-sum” situation. Every dollar the Courier and RTDs can pull out of FedEx through a union contract is one less dollar that they can pull out themselves. This would get into the politics between the ALPA and the Teamsters.

    The UPS pilots used to be organized under the Teamsters, no longer. They have an independent union just for UPS pilots (IPA, Independent Pilots Association). They just successfully managed to avoid layoffs for their low 300 seniority pilots. All of their pilots agreed to voluntary individual reductions in hours, to maintain the low 300 seniority pilots on active status.
  3. bbsam

    bbsam Moderator Staff Member

    i must say first of all that you are extremely pleasant and on many cases well informed. however, your generalities about contracting, while possibly relevant in the past have become somewhat less so in recent years. the degree to which the company "control" the actions of a contractor has diminished and at least in our terminal never really existed. on a regular basis i deliver out of a minivan with no fedex markings. i call in in the mornings to check on routes, drivers, etc. and then go golfing. i am advised of problems with service, vehicles, customers via cell phone by company and my drivers alike. i pay the tow bills, fuel, and repairs, and if i wanted too, i could take one of my spare trucks, load it up with lawn equipment and go do landscaping work. there is no provision in the contract to prohibit any of this from happening. as for using contractors at express, it would not require firing couriers if done over time and thus slowly eroding the power of the union one courier at a time. again, let me thank you for the interesting though i think surface level impression of the situation at fedex. though i tend to disagree with most of what you say, i do find your posts engaging and thought provoking. mrfedex should take a cue.
  4. MrFedEx

    MrFedEx Engorged Member

    If the execs in Memphis got wind of even half the crap you've been doing that violates "policy" they'd be all over you like flies on dog crap. Please take pictures of yourself down at Home Depot or Safeway loading stuff into your Ground-logoed vehicle and send them into Corporate.

    If you don't like the tone of my posts...too bad. Don't read them if you get all upset. And if I sound :censored2:-off at the way FedEx deals with it's people, either employee OR contractor....again...too bad. FedEx continues to operate above the law in all of it's divisions and it's time that this corporation gets brought back within bounds.
  5. Ricochet1a

    Ricochet1a New Member

    Let me add this then regarding independent contractors. Independent Contractors by their “nature” perform their services for a variety of businesses/customers. The “independent” status is a recognition that a permanent single customer/contractor relationship doesn’t exists. If a contractor performs their service exclusively for a single business/customer, then they are not independent in the pursuit of their business, and therefore aren’t independent contractors (more like “dependent contractors”…).

    So let me ask you this bbsam, how many other companies that need to have packages delivered do you provide your services to? Do you contract with a local courier service, to deliver their packages? Do you contract with DHL to provide cartage agent service for their international shipments into the US? Do you contract with a local dairy to provide delivery of their products to customers that happen to be located along the routes of your helpers (two deliveries for the cost of one so to say)? I ask these questions knowing that you may indeed be able to answer in the affirmative to at least one.

    Are your helpers required to wear FedEx clothing, or are they able to wear uniforms that have your “company” logo on them?

    Do your helpers have to use FedEx standards of service when they have interactions with the businesses/customers for which you are acting as an agent of FedEx? Are your helpers required to attend any FedEx “training” as taught by an employee of FedEx?

    Do you have complete discretion to purchase the vehicles necessary to carry out your business without restriction by FedEx, or does FedEx place requirements upon the types and capabilities of vehicles that you purchase for use in the execution of your business?

    Do you have regular assignments of routes for your helpers, or do you assign routes without regard to whether or not they’ve run that route in the past?

    You stated that: “the degree to which the company "control" the actions of a contractor has diminished and at least in our terminal never really existed.” This tells me that the company did have a high degree of control until recently, and relaxed that control in order to preserve the pretense of the independent contractor model. I specifically have used generalities regarding the classification of contracting to avoid getting into a highly detailed discussion of contract law (which serves no purpose on this forum).

    As for “slowly” replacing employee Couriers with “independent contractor” Couriers within Express… No court in this country would allow a company to have a situation where employees and independent contractors were doing the exact same task, working side by side for the same employer. Wouldn’t happen... If this were so, Fred could bring in Ground drivers right now into Express to perform Courier functions, but maintain their “independent contractor” status. In the eventuality of an Express strike, Fred would bring in Ground drivers where necessary, BUT they would be given temporary employee status if they operated Express equipment.

    Let me ask you these questions. How much do you pay your helpers in wages per hour? What kind of benefits do you extend to them? What is the average number of hours a week your helpers work for you? Do your helpers consider their work for you a “career”, or work which they perform until they can find something better. What is the average length of employment of your helpers with you?
  6. MrFedEx

    MrFedEx Engorged Member

    bbsam isn't going to give you any type of answer except one that portrays him as a successful capitalist entrepreneur. Never mind that his drivers don't get squat. Rush and Glen would be proud of him....and Fred's little Ground game too.
  7. Ricochet1a

    Ricochet1a New Member

    This is the aim of “dispassionate” debate, to have each side present their best argument and let the “audience” decide. I may disagree with a lot of people on things, but I want to give them the opportunity to present their viewpoint without the threat of an ad hominem personal attack being launched. I presented an argument that was as short as I possibly could present it, and would like bbsam to respond to the specific points I raised. I obviously asked those questions since the answers I anticipate would support my position, and provide the reader to this forum additional insight as to the practices and conditions within FedEx. I think the reader to my posts has figured out my approach by now; feed out the rope and let who I’m debating create their own “mishap”. Having a multiple vehicle contactor state their position, and give specifics regarding how they compensate their “helpers” will give the Express employee (and the UPS employee) an idea of what they are up against.

    Now, regarding the “surface level” characterization of my arguments… I take no offense to that. I deliberately want to avoid getting into minutia that would cause the glazed eyes of the reader to have their eyes completely roll back. I deliberately attempt to keep the focus on the “big picture”, so that the reader can make an evaluation of the situation without having to take courses in business law, contract law or business ethics. Target the message to the audience, and one will succeed in getting their point across.

    I’d also like to keep the debate focused on the treatment of the employees of FedEx (and misclassified employees of Ground), and off of politics. An overwhelming majority of my income is through capital gains, not earned income (call me a capitalist). I’ve worked part-time while slowly working on an advanced degree to maintain insurance, have some earned income and continuity of “employed status”. Years ago when I first started with FedEx, I was thinking that it may be a place I’d like to start a second career. My research into FedEx unfortunately consisted of material that was relevant to the FedEx of the 1980’s and 90’s. I knew within a year of starting FedEx that the company that I had so carefully “researched” wasn’t the company I was working for at the time. The past 18 months things have gotten worse on what I’d describe as an exponential scale.

    What FedEx has done to its employees in the past 18 months can only be described as pure opportunistic greed, no other explanation exists. The pension plan was pulled BEFORE the economy went into recession, not after. The 401(k) matching funds were withheld with full knowledge that the pension plan had been gutted just months before. The pay freeze was done while FedEx continued to preach the People, Service, Profit motto to its employees. The puzzling thing to me is why did FedEx, after knowing a “hostile” administration was about to enter office, decide to nearly simultaneously freeze pay and 401(k) matching funds, when they knew the threat of having their RLA exemption pulled was real? FedEx’s actions now can only be described as I stated earlier, paranoia.

    Capitalism goes hand in hand with good labor practices. Companies that have provided consistent quality to their customers, and treat their employees with respect and dignity almost always do well in the market place. Companies that take an insular view of operations and run the enterprise off the spreadsheet instead off the “operations floor”, tend to suffer in the market place. That company I researched a few years ago could’ve been categorized as a “theory Y” company (this is for the sake of bbsam). Now it is solidly in the “theory X” category, and moving towards the “gulag” category each month.

    As that capitalist, I had an opportunity to make some stock purchases in early March when everyone it seemed panicked over the future of the country (always buy on the bottoms). Both FedEx (FDX) and Ford (F) were looking really good. I couldn’t purchase FDX stock in good conscience, since I know how they operate. But I did purchase 50,000 shares of Ford (one of those “bad” union dominated American companies). I recently took profits on those 50,000 shares. It seems that a company that has a union working in partnership with management to produce a product can be a good buy.

    We’ve all read the FedEx lore of how single employees, when faced with a near impossible situation, thought “outside the box” and provided that “outstanding customer experience”. If those same situations were to be encountered today, the employee would be hamstrung by the need to maintain goal, and would be left giving the 1-800 number for the customer to call (along with a bit of good luck if they actually get through to someone who knew what they were doing).

    Part of “good capitalism” is providing a standard of living for the employees of that company that allows them to live a soild middle class lifestyle. FedEx used to be one of those companies for its employees. Now, it provides a lower middle class lifestyle for its full time employees, and is quickly moving down. This is an unfortunate side effect of today’s business ethos. Employees shouldn’t be left with the false options of having to put up with constantly eroding standards of living or quitting. Employees have an opportunity to make their voices heard, through a union and collective bargaining. It isn’t socialism to bargain collectively with one’s employer, it is almost uniquely…… American.
  8. Excellent posts as usual but too long for the uneducated viewers of this site.As I have posted since I first joined this site,Fred and his Memphis Mafia have been shafting all the employees of Fedex for years.When the litigation between the Ground and Home drivers versus Fedex is settled and Fred loses the floodgates will open.The Fedex corporation will have to pay hundreds of millions of dollars in compensation to the Ground and Home drivers and back taxes and penalties to the Federal goverment and each state.
  9. bbsam

    bbsam Moderator Staff Member

    were i to be in a court of law and trying to defend against richochet i would have to sheepishly sigh and stammer incoherently. but alas i am not a lawyer, nor am i in court. rather i am the antithesis to mrfedex. i like my job. i like my company, and i like the opportunity it affords myself and other contractors. as for my employees, and mrfedex, they are all free to work elsewhere. you are right, that my employees do not enjoy the pay and benefits that ups drivers do, but they paid better than dhl drivers were. but then again they have never been subjected to timestudies, layoffs, or even start times for that matter. i will leave the legal battles to fred and his team. but to use words like "misclassification", "sham", and "illegal" are presumptuous to say the least since the courts continue not to have come to an overall concensus. and mrfedex, nothing i ever do is under cover of darkness or hidden from management. it may be that they are very careful not to overstep their bounds for fear of further legal challenges. because, regardless of what you read and write on these posts, it has been my experience that i have tons of lattitude in what i do and when i do it. and yes, the minivan is an approved ground vehicle.
  10. MrFedEx

    MrFedEx Engorged Member

    I'll take your word that things have changed. Several years ago, in order to educate myself, I actually attended a Ground contractor info session. In the handouts were a number of legal requirements, one of which was that a logoed vehicle could never be used for personal business. You say that's changed, as have other provisions, probably to try and establish all of the freedoms you enjoy as an "IC" and blur the legal lines between employee and contractor. A typical FedEx ploy.

    I used to love my job and FedEx. I didn't change the job...Mr Smith did. You don't work for Express, but I have never had a score of less than 6.8 on a review in over 20 years. In Express-speak, that makes me an excellent employee in every category of evaluation that exists. I work hard because I have self-pride and a personal standard of excellence, not because I have any affection left for FedEx.

    I wish you had the perspective of over 20 years working for Mr I do. Then you would understand how long-term employees feel about the way that Fred did a 180 on them even as they continued to go above and beyond as is expected at FedEx every day.

    As much as I disagree with you, you're playing by Fred's rules and doing well in spite of them...I applaud your success. But it's naive to think that FedEx is an ethical employer. Testicular Fortitude is dead-on when he says that FedEx is going to get slammed in the near future. Nobody forgets being dumped-on, and payback is in the cards for Fred.
  11. Brown287

    Brown287 Im not the Mail Man!

    If Fed-Ex really cares about your employee ask yourself why they dont controll your opperation like McDonalds Inc. controlls all of thier indivisuall resturaunts. They are almost completely owned and opperated by indivisuall franchise owners but they are still REQUIRED to follow all of McDonalds rules and regullations. Fed-Ex could simply put in place employee compensation rules that all contractors had to follow and then your little scheme could almost completely continue with out distruption.
  12. bbsam

    bbsam Moderator Staff Member

    when on earth did i ever suggest that fedex cares about my employees? "employee compensation rules" would probably negate the contractor model. and in business, one learns to live with disruption so i'll take my "little scheme" as it stands and deal with these disruptions as the come:happy-very:
  13. Brown287

    Brown287 Im not the Mail Man!

    It was meant to be sarcastic. Im fully aware that Fed-Ex does not care about you or your employees, you will see first hand when thier scheme comes to an end and you are thrown under the Fed-Ex Bus!
  14. barnyard

    barnyard KTM rider Staff Member

    bbsam, you still did not answer one of the key questions posed: can you haul packages for other customers, like picking milk up at a dairy and doing home delivery?? or packages from another courier (there are small regional couriers in every part of the country) and deliver their packages??

    This would make you drivers more efficient and could add to your bottom line, but I suspect FedEx does not allow that.

    Also, what is your turnover rate?? Generally, trucking companies run over 100% every year.

  15. bbsam

    bbsam Moderator Staff Member

    sorry, been chasing the children. a couple years ago i looked into contractin with American appliance, the thought beeing that with i could integrate not only vehicles (straitght truck) but also employees. in that situation, the strait truck could use a magnetic placard from either American or fedex depending upon which freight was being used. with this setup, the truck would have been issued a dot number and thus i could have rented it from myself. i remember years ago that fedex supplied overlays to cover the fedex logos for non fedex activity, but at least in our area, noone ever asked questions about what we were doing with the vehicles outside of fedex activity so to my knowledge noone ever bothered with the overlays. i have on occasion used trucks to help people move, but that was when i was much younger when movin seemed a robust challenge. now it's just a pain in the rear. in fact now that i'm talking about it, i may look into American agan. things were too hectic then, but i have much more free time these days.
  16. bbsam

    bbsam Moderator Staff Member

    as to turnover rate, i would guess around 30%. that being said, i have found that not all turnover is bad turnover and in the last few months, with the horrible economy, i've had several return looking for open positions and hired back one of them. also i would ask you what percentage of the drivers in your area that you almost wish would end up being turned over.
  17. The Ground and Home owner operators in the northeast have to get the approval of Fedex management when they hire drivers and workers.I know this for a fact because a former Express worker I know, now is a Ground operator with 3 trucks.Also my best friend an ex Express worker can not work for his relative who has 2 trucks.These so called independent contractors still have to follow Fedex rules and regulations.
  18. bbsam

    bbsam Moderator Staff Member

    not exactly true. the ground contractor can hire whomever he wants. however, doing so will cost him the EPP bonus paid out every quarter. so it is up to the contractor. in my instance it would cost me $26000 per year. also, the approval that fedex gives is standard and i don't think overly burdensome. physical, drug-screen, background check, things i would probably do anyway.
  19. Ricochet1a

    Ricochet1a New Member

    So in otherwords, you can operate your business as you please, but you'll be penalized with a withholding of monies if you don't operate as FedEx "suggests". This isn't an independent contractor model, it is legalized extortion. FedEx demands that your employees meet a certain standard, or they'll reduce payment to you? They can call it a bonus, but it is a requirement. I'm sure that $26,000 is a substantial part of your annual profit margin. You don't comply, you don't make a decent profit.

    Are there any "contractors" that don't get the "bonus" and are still able to make a profit on their "business"?

    More FedEx shell game of trying to claim the use of independent contractors, but exerting an employee-employer control all the way down to the "helpers". This is why this charade will eventually end. It is misclassification of the worst kind, only allowed to continue because of FedEx's legal struggles to keep it in motion.

    The Express employees are getting like treatment, just not as severe; since we still have "employee" status with the corporation.
  20. MrFedEx

    MrFedEx Engorged Member

    Well stated. The level of control FedEx exerts over so-called IC's is so extensive as to make it an employer/employee relationship. This is so typical of the way FedEx operates....always at the edges of the law and able to get away with it (so far) because of a huge legal department and political connections.