Indy Contractors & Fedex

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Part 1 of Steven Greenhouse's "Working Life (High and Low)", adapted from his new book, The Big Squeeze: Tough Times for the American Worker, tells a sad story of Jean Capobianco, a Fedex route owner whose contract was terminated, after she failed to deliver her route's packages. She had developed ovarian cancer, but because she was an independent contractor, Fedex didn't have to make any accommodation for her. When she didn't find a replacement driver for her route (because, it seems, the available short-term replacement drivers wanted an arm and a leg), Fedex terminated her route, and she lost her truck when she couldn't make the payments.


She soon discovered that her new employer
[Roadway, not yet Fedex Ground] had embraced a controversial strategy to squeeze down costs by millions of dollars each year: it insisted that Jean and the other drivers were independent contractors, not employees. The I.R.S., New York and many other states are investigating this strategy, convinced that many companies use it to cheat their workers and cheat on taxes.

Now, Mr. Greenhouse is very cute about this.

First of all, there are a lot of particulars we don't about about that he does. I think that we should have been told that she started at Roadway in 1993, ten years before her route was terminated by Fedex. Presumably she was making decent money some of that time, or she would have tried to get out.

But more importantly. Mr. Greenhouse calls Ms. Capobianco a "driver", who "requested a leave of absence" but was "terminated." That description of the facts fits right into the lawsuit she and others have against Fedex. Mr. Greenhouse lets her have this version of history, and that's his right, but presumably Fedex would never characterize their dealings with her this way.

But, again, the facts of the case are completely unclear. We simply do not know the terms of the contract between Jean Capobianco and Fedex. According to her own complaint:

17. In or about August 2004, Plaintiff Jean Capobianco was diagnosed with ovarian cancer. Ms. Capobianco reported her diagnosis to the Terminal Manager at the Defendant’s Brockton, Massachusetts, facility.
18. Due to her cancer, Ms. Capobianco was forced to go out of work to undergo surgery and further cancer treatments, which she reported to the Defendant, through its supervisory and management officials.
19. Ms. Capobianco requested to go on a medical leave of absence, but the Defendant never responded to her request.
20. At no time did Ms. Capobianco engage in or allow any intentional misconduct or reckless or willfully negligent conduct relating to the use of company equipment.
21. At no time did Ms. Capobianco breach or fail to perform the contractual obligations imposed on her by the form contract.
22. The Defendant unilaterally terminated Ms. Capobianco’s contract on or about October 26, 2004, while she was still out on medical leave, for no reason permitted by her contract.
[Emphasis added]
But does her contract with Fedex allow for a medical leave of absence? We don't know, and we're not told one way or another. From the article:
FedEx Ground officials said they had sympathy for Jean but had to terminate her under company rules, because she was no longer covering her route and she hadn’t found a replacement driver.

Company officials said they were free to terminate her because in FedEx’s view she was an independent contractor and therefore not protected by the Americans With Disabilities Act. That law requires companies to make reasonable accommodations to keep employees who have cancer or other disabilities. Jean has sued FedEx, asserting that it violated the act.

I cannot believe not delivering on her route was not a reason for termination specified in the contract, but again, we don't know.

And I cannot fathom why she didn't try to sell her route?!

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Notice one thing -- the independent contractor "strategy" may by "controversial" (because it stands in the way of unionization) -- but it is not NEW. In fact, it's very, very old.

You know all those folks who deliver soda, bread, orange juice, hot dogs, and ice cream to your local deli and supermarkets? Yup, many are independent contractors who own their own routes, and are required to own their own equipment.

And they have been operating this way for DECADES if not, as I believe, for over a century!

I mean, just Google "distribution routes for sale" and the very first link to pop up is routebrokers.com, which is offering everything from Snapple to Tropicana to Coke to, you guessed it, "Fedex Gound / Home Delivery"! They're asking 75K, including vehicle, providing documented historical revenue.

It seems the people pursuing lawsuits against Fedex think this an aberrant employment regime because the contract with the independents has unique controlling provisions that other, similar contracts don't:


“We’re told what to do, when to do it, how to do it, when to take time off,” Jean said. “You have to wear their uniform. You can’t wear your hair certain ways. You have to deliver every single thing they put on the truck.”

But frankly, these provisions ( particularly the last one!) don't appear at first glance to be unique at all. However, that's for a finding of fact to decide.


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You might think that independent contracting is not beneficial from an employee point of view, but growing up, I knew four families whose livelihoods depended on precisely this type of business. Three owned routes, (two Tropicana, one Boar's Head). All were very successful: each owned their own homes, a boat, and a vacation home. The other family owned a repair shop where the independent contractors trucks were fixed. They too made a decent living.

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OK. So here's an idea: both Fedex and its employees might just benefit from this contractual relationship.

Certainly, Fedex hyped the amount its indy drivers could make, and it does save by transferring ownership risk to its contractors, while getting them to work much harder than employees would.

But the idea that Fedex can just magically transfer the complete cost of its delivery trucks to independent contractors is economically illiterate: did not Ms. Capobianco demand and earn a premium for taking on this risk? How much would she have made in alternative driving opportunities? Is that why she stayed at Roadway/Fedex for 10 years?

And aren't there Fedex route owners who like the current way of doing things, who have expanded their routes, who have succeeded? Do they not exist, or were they simply unavailble too comment? At the very least, Mr. Greenhouse should have tried to find someone who succeeded in this model.

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FEDEX THE NEW WALMART

Not if my lawyer has anything to say about it!

interested in truck routes

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This page contains a single entry by Kevin published on April 21, 2008 8:31 AM.

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