FedEx, in a firm response to a move by a group of FedEx Ground contractors seeking financial relief from the carrier, warned that any collective bargaining activity would put them in breach of contract, even as the group seeks to create a representative committee.
In a letter sent Wednesday to all 6,000 FedEx Ground contractors, unit president and CEO John Smith said the company would not negotiate “agreements or financial terms” in any fashion with a group “purporting to represent a collective body of service provider businesses.” Smith also said the group was making “across-the-board financial demands” while setting a deadline of Nov. 25 to resolve them, just as peak season kicks in.
“The service provider model was built around the recognition that each business has unique and distinct characteristics and entrepreneurial goals, and therefore each agreement is – and will, without exception, continue to be – negotiated individually,” Smith wrote. “Moreover, any effort by service providers to negotiate financial terms as a group is a breach of the contract with FedEx Ground.”
Smith added FedEx expects every contractor to “honor its obligation to provide service.”
Beyond that, Smith said the company acknowledged the difficult market conditions and cost pressures faced by contractors, and remained committed to discussing them with individual operators.
“We are committed to listening, reviewing the relevant data about your business, and engaging in a productive business-to-business dialog,” Smith said. “We believe this is the most effective path for creating continued opportunities for success and respecting the fact that each of you own and lead your own businesses.”
A FedEx spokesperson added the company believed individual negotiations were the only way to address each business’s unique characteristics, including service area geography. “FedEx Ground teams across the network are continuing these productive discussions at a business-to-business level,” she said.
The average revenue for Ground contractors in 2021 was $2.3 million, and more than half had been working with the company for five years or more, she said. “They’re growing and evolving their companies alongside FedEx Ground as we jointly navigated opportunities presented by the rapid growth of ecommerce,” she said.
Smith also pushed back against assertions made by Spencer Patton, who is heading up the contractor revolt. For one, he said Patton’s estimate that Sunday delivery was a $500 million drag on FedEx earnings was “inaccurate.” The company announced late Thursday it was suspending Sunday delivery in some less-dense markets, a day after Patton made that one of his group’s requests.
“We have been evaluating the efficiency and market demand for these operations for several months, and it is after this thorough analysis that FedEx Ground announced the suspension of Sunday delivery operations in certain markets,” Smith said.
He noted that Ground service levels have been improving this year, particularly in the past three months, a fact confirmed by industry experts who spoke to Multichannel Merchant.
In a letter last week to Smith and the rest of FedEx management, Patton asked for a 50 cent per stop increase for FedEx Ground delivery contractors, to continue for 12 months before reevaluation, and 20 cents more per mile for line haul deliveries, with spot runs getting a 10% boost. Patton cited the company’s recent profits as well as economic conditions faced by contractors, as well as significant investments made by many to prepare for projected Q4 volume that didn’t materialize.
Patton said Contractor Expo + Party, a trade show put on by his company and sponsored by service providers to contractors, is attracting more than half of FedEx Ground contractors in the U.S. The event is also geared toward Amazon Delivery Service Providers (DSPs) who own their own business handling parcels for the ecommerce giant.
Patton owns both Patton Logistics, a major FedEx Ground contractor based in Nashville, as well as Route Consultant, which advises current and prospective contractors for FedEx and Amazon.
At the fourth annual event, to be held in Las Vegas, a process will begin to select a committee of 10 contractors in September. Voters will agree that the group can speak on their behalf in dealing with FedEx Ground – a scenario Smith has already said is a non-starter.
“In order to vote for the members of the committee, people will check a box to attest that the committee has the authority to speak on their behalf,” Patton said. He added his group will respond next week to Smith’s letter.