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Lead FedEx Ground contractor says he may shut his business by Nov. 25

Spencer Patton says he can’t operate without company help for his business

Trade group seeks no confidence vote on FedEx Ground CEO (Photo: Jim Allen/FreightWaves)

It is clear that Spencer Patton, the leader of a nationwide effort to raise awareness of the financial plight of FedEx Ground’s delivery contractors, will not go gently into that good night.

In a combative address before roughly 4,000 FedEx Ground contractors Saturday night in Las Vegas, Patton, one of the largest contractors in the FedEx Corp. (NYSE: FDX) unit’s network, threatened to shut his business on or about Nov. 25 if the unit fails to renegotiate his contract and ease the cost-inflation burdens plaguing his company.

Patton has said the unit has denied his company’s repeated requests for renegotiation. Many contractors seeking renegotiation have either been ignored or seen their request denied, he said Saturday.

Contracts between FedEx Ground and its contractors can be renegotiated during their terms. Contractors need to present FedEx Ground with detailed evidence to support the need for renegotiation. Contractors look to renegotiate their contracts to adjust their pay scales in an effort to offset rising costs.

FedEx Ground said last week that since January about 10% of all agreements have been submitted for consideration to be renegotiated. It added in Monday’s statement that, in the past 3 months, more than 1,600 contracts have either been newly negotiated or have been re-negotiated.  

This year, Nov. 25 is the day after Thanksgiving. The day is known as Black Friday because of its heavy shopping volumes. Patton is calling it “Purple Friday,” a reference to FedEx’s primary logo color used on vehicles and aircraft. In communiques over the past 40 days, Patton has said FedEx Ground needs to provide adequate financial support to contractors by that time. If not, many may not make it through the holidays, he said. 


According to various estimates, including Patton’s, between 20% and 35% of the contractor network is experiencing some level of financial distress. The pressure has been caused largely by rapidly escalating costs and a slowing of delivery volumes as e-commerce demand has leveled off since the pandemic.

Patton has formed a trade association, the Trade Association of Logistics Professionals, which he said is open to all contractors working on behalf of transport and logistics companies. Within that group is expected to be a 10-person committee that will act on behalf of FedEx contractors.

FedEx Ground has said it will only negotiate changes to contractors’ contracts on an individual basis and not through any form of third-party bargaining unit. The unit, whose parent has been adamantly anti-union for its 50 years in business, has interpreted Patton’s reference to Nov. 25 as a deadline and ultimatum.

Patton has publicly eschewed such specific language but said in his Saturday remarks “we need to have a timeline” to ensure contractors stay afloat to provide reliable service during peak season.

In a statement Monday, FedEx Ground said the model remains on solid ground, and that most service providers are committed to providing high-caliber peak-season service. The unit said it will discuss annual peak-season financial incentives, known in the network as “Schedule K,” in the next few days. The unit said it has stabilized field staffing levels and modernized dock operations to improve the quality and reliability of pre-load operations. 

The unit also said it has made “multiple enhancements” to route optimization technology and the processes and data that support it

No more contingencies

Patton, whose Nashville, Tennessee-based company operates out of 10 states with 225 drivers and 275 trucks, 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. Contingencies can also be provided by external third parties if no contractor can pick up the slack.

Because of their urgent nature, contingencies can cost FedEx Ground between two to five times more than what it would pay contractors to fulfill regular pickup and delivery commitments. Many contractors have become millionaires through their acceptance of contingencies. Contingencies have also allowed FedEx Ground to maintain service continuity during often adverse and unexpected circumstances.

However, Patton said he can no longer endorse the use of contingencies in his business because they do nothing but bail out FedEx Ground at a time when many contractors are struggling financially. Contingencies, he said, are no longer a “friend” to the contractor network.

Patton called on FedEx Ground to eliminate all Sunday deliveries since he says those services cost the company and its contractors dearly because there aren’t enough volumes to justify operations. FedEx Ground has suspended Sunday services to those parts of the network with low population densities. It has said 80% of the U.S. population will still receive Sunday deliveries.

Patton also announced the launch of a “purchasing alliance” to leverage the contractor network’s $15 billion in annual buying power to receive volume discounts on fuel, trucks and tires.

Patton peppered his comments with sharp attacks against FedEx Ground, contending top leadership and executives across the network have “lost their way” in understanding the needs of contractors and their role in making the business run as it has for most of its 25-year existence. Patton said FedEx CEO John Smith did not respond to requests to speak to the contractors attending the two-day Las Vegas conference.

Patton also criticized the FedEx unit for unilaterally imposing changes to its contractor networks and for doing so on such short notice. Line-haul drivers, who along with local pickup and delivery drivers make up the delivery network, get virtually no say-so in pay negotiations, Patton said.

FedEx Ground operates under a nonunion model with contractors typically working under 12-month contracts. Contractors get the exclusive right to deliver packages within specific territories. For years, most routes supported business-to-business (B2B) volumes, which had solid margins because the routes handled multiple packages per stop. The attractive economics have allowed many contractors to prosper each year they owned the territories and also when they sold them.

In the past five-plus years, however, residential deliveries have overtaken B2B due to the explosive growth of e-commerce. Business-to-consumer traffic is generally priced at lower levels than B2B. As a result, contractors are typically paid about 40% less on residential packages than on B2B shipments. 

Residential deliveries also impose a greater operating burden on contractors because their drivers are delivering one or two packages per residence rather than dozens, if not, hundreds, of packages per stop as is common in the B2B segment.

B2C delivery demand has leveled off as more consumers return to in-store shopping. To compound matters, staffing shortages at the unit’s ground network led to service problems and higher costs. The unit has maintained that staffing problems are behind it. 

Optimism still prevails

FedEx Ground regularly produced double-digit annual operating margins for much of its existence. However, the pivot to lower-yielding residential deliveries and massive costs of re-engineering its delivery infrastructure to support the shift has compressed margins to high single-digit levels, a quite unfavorable trend for investors. The unit’s executives have vowed to sustainably boost margins into the double-digit range.

The catalyst for the latest set-to are labor shortages combined with surging costs of fuel and equipment. Tom Wadewitz, transportation analyst for JP Morgan Chase & Co. (NYSE: JPM) who attended the event, said in a Monday note he was told by many contractors that they are having trouble finding drivers and that the problem is expected to last through the rest of the year.

Contractors also complained about rising costs of new and used trucks, higher repair costs and parts shortages, Wadewitz said. In addition, volumes have weakened incrementally in recent weeks as higher fuel costs have eroded consumer purchasing power and economic activity, Wadewitz said in the note.

However, Wadewitz said most of the contractors he met boasted more than 10 years of service at FedEx Ground and still believe in the future of the model. Most of the concerns, he said, are addressable and should not lead to any interruptions in the unit’s business.

25 Comments

  1. Dartanyan

    I was a FedEx P&D contractor for ten years. I am sympathetic to the plight of current contractors, and I am also glad to no longer have anything to do with FedEx. One of the issues that drove me away was the sadistic, passive-aggressive management style and the complete, total, and utter lack of respect FedEx demonstrates to it’s contractors on a daily basis. When FedEx has service problems, they blame it on a “labor shortage” as if to imply that there is a lack of available workers in the population. The truth is that it has become common knowledge that FedEx Ground is a terrible place to work, and nobody wants to work there.

  2. David jacks

    Ok, so i work ar Express for 22 yrs now. My son has a buddy he went to school with and i have known all his life, he is a ground contracter with over 10 routes… all the same issues i see here. FDX charges a fuel surcharge and shares it with contractors, that aint right or fair u should b getting it all. Mr Patton is right “lost their way” there are many many problems within Fedex and it is causing revenue sharing issues corp wide. Of course some will see it moreso. John Smith is the son of Fred the founder, we have seen and heard from him in Express communiques for the last 5 yrs, i will just say this much…he CLEARLY isnt Fred!!! The real issues we face at Fedex as a whole, #1 CORP GREED, same as any other company in the US today. We are very top heavy, been lead to believe technology was going to save us, that being ISO is such a great thing, and that for you ground guys ” yea we are going to cut your per package, but you will make more money because you will be handling more packages” that is now there level of competence. We are in such mess on Express VM that they annouced a new VP, 1 managing director retired, 1 resigned and 1 was walked out!!!!! We have gone from being on time for ALL pm’s with our old shop mgmnt system to being 6,10,15 behind with there NEW GVMAX system. Because it was going to be better!!! This really is very simple… you make a package move when you say it will, PAY the people well and according to the toils they face daily, treat them with respect, pay those top execs what they deserve and not some inflated price…. stop the insanity of the golf,nascar,football and all the other exec perks disgused as advertisement and then maybe we couldreturn to the Fedex that everyone wants to work for.

    1. Stephen Hughes

      John Smith is not related to Fred Smith. And it is hard to justify your claim that FedEx’s real issue is corporate greed, when UPS is similarly-sized and twice as profitable.

  3. CJ

    The big 4 of fleet expenses: labor, fuel, equipment and maintenance (in this case there is no benefits, most, if not all are 1099s). With the recent move to take pictures (like Amazon), drivers are forced to spend a little more time per stop to offset claims made by customers (damage, lost, stolen, etc). Now, maybe it does sound like much and most will think the benefit will be greater good. BUT, the current process doesn’t support this as quickly…when you add 1-2 hours per day for the same pay, something has to give and it shouldn’t be the workforce taking the hit. Is the solution benefits? Maybe more pay per stop? Cap routes up to a certain amount of stops? Hearing a person say “I cannot afford to work here anymore” is sad and concerning, as you have someone doing what they enjoy, is financially stressed as well. Good day and always be safe!

    1. Dee Mac

      As a driver it is really sad. I been there for 3 years. Every time I ask for a raise they tell us the money isn’t there. There is no incentives or anything. The driver has nothing to look forward to but more packages. It’s unfortunate. I’m currently on a waiting list to start UPS. I can’t wait!

  4. BK

    What FXG has done to it’s contracts with the Schedule K is absolutely insane. Inflation across the board with labor rates, fuel, and vehicles and FXG pays $10s of thousands less per week. I can’t imagine what they’re thinking. It’s as if they’re wanting contracts to fail and go out of business. Makes no sense at all.

    It’s be interesting to see what happens over the next few month heading into peak season. There were a lot of angry contractors in Las Vegas over the weekend.

  5. Nothanks

    I’ve been a ground contractor since the early 2000s. The model isn’t what is wrong with the company. The main problem is FedEx isn’t paying contractors enough to pay our drivers what they deserve. Most fedex Ground drivers live paycheck to paycheck. Driver turnover and labor shortages are only a problem at the wages contractors can afford to pay. The solution is simple: Transparency. FedEx needs to be more transparent with contractors about how contract valuations are determined.
    Contractors do not get to negotiate the overall valuation of their annual contracts. Calling the process a “negotiation” is misleading at best.

    1. AWig

      This right here…exactly!! I was a driver for almost 2 years, I LOVED every minute of it even on the bad days (stuck, flat tires, overwhelming stops) but $150/day isn’t enough…if you’re working 10 hrs that’s $15/hr…I mean I make more than that as a package Handler with a set schedule AND Benefits…that’s another thing that turns drivers away, most contractors still do not offer insurance bc they’re not able to which is a huge drawback.

  6. Kevin Grave

    I’ve been doing this for 25 years and I can honestly say that this company has really went down hill! Fedex doesn’t care about the contractors, they push every thing to us no matter the cost. They push more work for less pay! We are told how everything has to be done and when! There is no negotiating anything, it’s take it or leave it. We absorb all the cost and not to mention everything else that goes with it. And the driver shortage, it’s like pulling a rabbit out of a hat, but Fedex don’t care about that, they need to relax the requirements. What it amounts to is a bunch of over paided Corp people that don’t know what it takes to run a business on our level. Lots of contractors will be leaving if Fedex doesn’t do something different! And the idiot who started Sunday’s, needs to get drug tested!! Wake up Fedex!!

    1. Robert Davidson

      I am a former RPS (Roadway Package System-the predecessor of FEG) contractor. Have no sympathy for any of these FEG contractors. A lot of you are the ones who showed up at contractor info meetings in the 1990’s, but didn’t want to do the “grunt work” required to be an RPS P & D contractor then. A lot of you waited until FEG took over, then try to make easy money off of employee drivers.
      Amazon Prime is delivering their own packages now. Furthermore LaserShip & OnTrac have merged, in time like the old RPS, they will achieve continental USA coverage.
      None of you should have stood for FEG paying different contractors, different amounts for the same work. They tried this in 1997 after the UPS strike, decided that they would give new contractors $45/day van availability and pay existing contractors the standard $40/day van availability. We lit up the phone lines to contractor relations at headquarters and we soon got the $45.
      And by the way, unless John is his first name or middle name, I always knew Mr. Smith as “Fred”.

      1. JB

        John is Fred’s son. It may help if you’re planning on contributing to discussions about modern FXG issues to be aware of what’s different from 30 years ago.

        The issues we face weren’t really relevant back then. The massive cut to e-commerce and self-stated motivation of FedEx to have our drivers increase their workloads for less pay is the problem. Our margins had no room for mistakes. Covid inflation just magnified everything and accelerated financial issues.

      2. Dallas Kester

        Old and bitter. You are clueless to what’s happening today. Do some research before posting. Made urself look like an idiot !!

        1. Robert Davidson

          Oh BOO HOO! You might actually have to climb into a step van and make some deliveries. Try running 375 to 400 miles/day when you didn’t get mileage pay over 200 miles because your step van is under 500 cubic feet (I had a 1994 Ford P400). Try filing out DOT logs and juggling your hours in a week because you go over 12 hours/day at least one day/week. Run 1/3 of your terminal’s surface area while 6 other contractors ran the other 2/3 of the surface area, and stops are juggled so the terminal manager’s two drinking buddies got back to the terminal at 4 pm. Amazon is delivering the majority of their own packages, so there goes a lot of e commerce. I stand by my statement of who a lot of you are, we even had one contractor try to talk the regional manager into letting him have all the routes, and he would hire drivers. Turns out the jerk couldn’t even run the one route that he was given, and ended up being terminated 2 years after our terminal opened. Now you are threatening legal action, that has already been tried, a lot of RPS contractors got a settlement, but in doing so, they lost their livelihood. Fed Ex will never make Ground drivers employees, the same as Fed Ex Express will never unionize because they are under the Railway Labor Act. The only Fed Ex division that could organize would be Fed Ex Freight, but Fred is smart enough to keep those drivers happy so that they don’t. Thank you for the clarification of who John Smith is. As to calling me an idiot, you are a little bit late, that was the ex wife’s nickname for me when I wouldn’t do what she wanted. I know blamed well what is going on there, I see the FEG drivers, some of them we wouldn’t have hired for temp drivers at the rural terminal I ran at. That’s ok, a lot of Ukrainians & Afghanians are looking for jobs and there are only so many taxi companies around. Sayonara sucker!.

Comments are closed.

Mark Solomon

Formerly the Executive Editor at DC Velocity, Mark Solomon joined FreightWaves as Managing Editor of Freight Markets. Solomon began his journalistic career in 1982 at Traffic World magazine, ran his own public relations firm (Media Based Solutions) from 1994 to 2008, and has been at DC Velocity since then. Over the course of his career, Solomon has covered nearly the whole gamut of the transportation and logistics industry, including trucking, railroads, maritime, 3PLs, and regulatory issues. Solomon witnessed and narrated the rise of Amazon and XPO Logistics and the shift of the U.S. Postal Service from a mail-focused service to parcel, as well as the exponential, e-commerce-driven growth of warehouse square footage and omnichannel fulfillment.