FedEx Ground has played hardball, and in so doing has tossed its most militant delivery driver contractor from the game.
Late Friday, the ground-delivery unit of FedEx Corp. (NYSE: FDX) announced it immediately ceased working with a group of delivery service providers controlled by Spencer Patton, a Nashville, Tennessee-based contractor engaged in an increasingly hostile fight with FedEx Ground over the financial condition of its 6,000-member contractor network.
In a statement late Friday, FedEx said it had “exercised its rights” under its contract with Patton to sever ties with his companies. In a separate email on Saturday, the company said the action was based on Patton’s businesses’ “continued failure” to meet the terms of their service agreements, despite the company providing them opportunities to do so.
Patton’s 10-state operation accounted for less than 0.5% of the approximately 60,000 total routes across the FedEx Ground network, the company said. “We have contingency plans in place and do not anticipate any impact to service based on these contract actions,” it said.
Patton oversaw a network, called Patton Logistics, with 275 trucks with 225 employees. Those employees are, for now, out of jobs.
Patton, like all other FedEx Ground contractors, operated across designated territories under contracts that run between 12 and 18 months. FedEx Ground uses a non-union contractor model to pick up and deliver packages and to provide linehaul service between the company’s hubs. Entities are required to purchase the right to operate the territories, and are free to sell those rights as well.
Patton declined comment beyond a statement issued late Friday afternoon disclosing the termination. He did not mention in the statement what his next steps would be. Patton said that FedEx Ground has long used “bullying tactics when interacting with their contractors to create an environment of intimidation.”
The move to end the relationship is a “clear case of a $60 billion corporation silencing anyone with a voice,” he said.
The move came hours after FedEx Ground had sued Patton’s consulting firm, Route Consultant Inc., charging it with spreading false and misleading claims about the financial condition of the driver contractors. In the suit, the company said the company sought to influence contractors into using its services to renegotiate their contracts.
FedEx Ground negotiates contracts directly with individual contractors, and has said it has no interest in working with third parties seeking to negotiate on behalf of other contractors. The company said that Patton is looking to insert himself as a bargaining representative, actions that would constitute a breach of contract.
Patton, who has said it would make no sense to manufacture turmoil at the company it earns his living from, has repeatedly warned that as many as 35% of contractors are in financial distress due to the rapidly escalating costs of fuel, labor and equipment. In addition, residential delivery volumes have leveled off along with post-pandemic e-commerce activity.
Without additional financial support from FedEx Ground, many contractors may not make it through the end of the year, Patton warned. FedEx Ground pays local pickup and delivery drivers a per-stop fee and its linehaul contractors a per-mile fee.
FedEx Ground has acknowledged the challenges facing the contractor network. Contractors can submit proposals to renegotiate their existing contracts, the company said. In its suit, FedEx Ground said it consented to 40% of renegotiation requests since July 1. More than 90% of those negotiations have resulted in higher contractual payments, the company said.
Patton has argued that the company doesn’t even respond to requests to renegotiate contracts, and that it denies many of the requests it does respond to.
Patton had become a polarizing figure in the FedEx Ground ecosystem, and his efforts have drawn significant contractor support. A two-day conference he hosted last weekend in Las Vegas drew about 3,500 attendees and thousands more watching and listening virtually.
At the same time, there are contractors who believe that Patton doesn’t speak for them, and that it is not his place to get between their businesses and FedEx Ground. One of those contractors said Friday night that “I’m saddened that it has come to this, but it is not unexpected. As [Patton] stated, he knew what he was getting into. Now I hope we can slow the rhetoric and get back to focusing on a successful peak [season].”
During his Saturday keynote, Patton said he would cease working with FedEx Ground on or about Nov. 25 – the big shopping day known as “Black Friday” – unless the company helps out his business.
Patton also said that for the rest of the year he will refuse FedEx Ground’s offers to provide as-needed support at other company terminals. These arrangements, known as “contingencies,” are designed to fill short-term service voids at designated terminals until FedEx Ground can find contractors to serve the routes those terminals support.
Robert
Blame UPS for setting up the stage for this whole scenario. I was an RPS contractor from 1994 to 1999. The management at RPS had talked with Fred Smith before the 1997 UPS strike about merging and it didn’t go anywhere. Federal Express was looking at setting up their own ground network before the strike as was Yellow Freight. When the UPS strike occurred (and it was a nightmare, believe me) that sped up the merger talks. A better merger would have been RPS and Airborne Express, but a lot of AE stations in larger markets were union Teamsters and Caliber Systems didn’t want anything to do with a union after spinning off Roadway Express as a stand alone company in 1995. That is also why they did not buy the old Overnite Transportation, because of potential union problems.
After the UPS strike was over, some one in Pittsburgh got the bright idea that they would pay the new contractors with new equipment $5 more per day van availability than existing contractors with old equipment were getting. We lit up the telephone lines to contractor relations and they gave us the extra $5 also.
Before the ISP/CSP concept was implemented, existing contractors were allowed a maximum of 3 routes. A brown noser at a neighboring terminal got a 4th route, luckily for him, I was in the process of selling my route and leaving, or that wouldn’t have stood either.
Tony
FedEx is in some deep do-do after a string of poor decisions. The allowed their cash cow and didn’t allow it to assimilate to the changing conditions, notably thumbing their nose at Amazon among others. Right now their biggest claim to fame is cost, while you hear complaint after complaint about their performance. They have forced the last mile contractors to continuously report lies about missed deliveries blaming the consignee to stay under the “demerit” radar and avoid FedEx management discipline. Meanwhile UPS, USPS have fine tuned their ground delivery services that supplement Amazon home deliveries as well.
In the end, FedEx’s major weakness is in too many depots are charged with intake and sorting of both ground and express parcels. There is just so long the bean counters can squeeze profits out of the profitable ground delivery division and starving their subcontractors. Good luck FedEx.
Rex
I don’t like articles like this because it’s sounds very one-sided even due it looks like it supports the other party. I like when someone hits the nail on the head and let the reader decide instead of helping them form an opinion. I don’t support the fact that a company will not even try to help his contractors, we all went through a recession or inflation whatever definition we give it. FedEx as a company will try every thing in his power to make sure the government help its business but same company won’t do the same for his own employees or contractors all in the name of profit. I will recommend the company do the right thing even if it does want to be hold at ransom by contractor but let them feel their voice is being heard.
Thomas Mulville
as a former business owner I have signed many contracts some very good and some not so good but if I signed it I honored it Patton signed a contract that he built a company with over 200 employees as an employer he has the duty to be able to overcome challenges in his business plan fluctuations in fuel prices is not a problem that is new if he signed a contract he needs to live up to the terms of it I wonder if he paid his employees more because their fuel went up its time for people to stand up mean what they say if he didn’t make a good decision signing that contract what makes you think that he can make good decisions for the people he claims to speak for
Thomas J
I take offense to Patton being characterized as “militant.” Patton is standing up for himself, his company and his employees.
FEDEX has a history of exercising is will against their service providers. Ground being the worst, and Custom Critical coming in a close second. Patton is in a pretty good position to go up against this behemoth, especially if he can get enough contractors to file a class action lawsuit against FEDEX that would be a very public case that could influence stock prices.
Good luck!
Mark Solomon
Someone who repeatedly, very publicly and in a confrontational manner agitates for change can be considered a “militant.”