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.