Just hours after it filed a lawsuit seeking "permanent injunctive relief and monetary damages" related to "false and misleading statements" about FedEx Ground, the Memphis, Tennessee-based company terminated all contracts with Spencer Patton, its largest delivery contractor.
The case claims Patton's consultancy for the delivery businesses, Route Consultant Inc., is the true beneficiary of all Patton's efforts to date, and thus FedEx has directed its lawsuit at this consultancy.
"I am being forced to pull our small businesses out of the communities we serve, but we are working hard to re-home our employees," Patton said. The logistics section of Patton's business currently has 225 employees across 10 states.
"We can confirm FedEx Ground exercised its rights to immediately stop contracting with a small number of service provider businesses owned by one individual," a FedEx Ground spokesperson later responded in a statement.
In July of this year, Patton claimed that FedEx Ground was driving many of the 6,000 independent contractors that deliver its packages out of business and was putting its network in "peril" through its unwillingness to address their concerns.
Since issuing that warning, Patton has formed a trade group to represent contractors and has talked about getting the small businesses franchise status.
FedEx, however, has said that its Ground network is sound and that it would consider any attempt at collective bargaining to be a breach of contract.
FedEx Ground contractors have long held several grievances against the shipping company, such as its May 2019 move to seven-days-a-week service, which many contractors say is not profitable due to lack of demand on Sundays. And, last winter, FedEx overestimated package volume for the holiday season, meaning many contractors didn't bring in enough revenue to cover the costs of ramping up their operations.
In a January letter to FedEx Ground, 800 contractors outlined the problems they were facing, including rising costs and diminishing returns. From 2020 to the 2021 holiday season, contractors said their profits decreased by 20% even though package volume was roughly the same. Vehicle costs, meanwhile, increased on average $10,000, and wages were 30% lower compared to the same time the previous year.
In his own letter to contractors on March 18, FedEx Ground's CEO, John Smith, said the company had taken a look at the fuel compensation for contractors and had determined it did not need to take any special action. "Our data indicates that service providers operating with either type of fuel are seeing weekly fuel-related payment increases that are commensurate with the recent market fuel price changes," Smith wrote.
Patton, of course, sees it differently. “For years, FedEx Ground has used bullying tactics when interacting with their contractors to create an environment of intimidation," he said. "This move to cancel our contracts is a clear case of a $60 billion corporation silencing anyone with a voice."