FedEx Cuts Positions in US, Cuts Rates in China
FedEx Corporation does not see Express or Ground or Freight or U.S. or Canada or Europe or China. FedEx Corporation only sees pools of money - earnings here can offset losses there, or a cut here to pay for an increase there.
Now, FedEx is announcing rate cuts - in the face of higher fuel costs worldwide - in China.
BEIJING, July 1 (Reuters) - Package delivery company FedEx Corp has lowered its rates in the fiercely competitive Chinese market despite higher fuel prices.
FedEx, which started its domestic shipping service in China last June, cut charges for its quickest service, FedEx First Overnight—which guarantees delivery before 10:30 a.m. the next day—by as much as 77 percent.
Its new prices for sending a 2-kg parcel from Beijing to Shanghai via First Overnight scheme is 31 yuan, or about a third of the 90 yuan charged by EMS, a state-owned courier agent.
'By offering the new rates to the market, we aim to provide more customers with access to our reliable services so that they can optimize their supply chains,' a FedEx spokeswoman said in an e-mailed statement.
Ongoing cost containment in the U.S. And price cuts for the China market. More of the 'levers' that FedEx management feel they can push and pull at will.
-- July 01
FedEx Looking at Container Business
Fred Smith had some interesting comments about his views on the ship-borne container business.
There's a tremendous movement of the lower value added traffic off of the traditional freighter airplanes onto the water, onto the sea. We pick that traffic up in FedEx Ground and FedEx Freight as it comes into the United States and we manage a fair amount of our FedEx Trade Networks unit. That's one of the reasons we bought Watkins and converted it into FedEx National. It is perfectly suited to move items that are coming in on the water into the interior points of the United States in the absolutely most efficient manner. So these long-term segular trends play to our strengths. It's exactly the way we're configured. And I just came back from Europe last week and again went to a couple of our locations and you can see this taking place right in front of your eyes.
Those comments were made on the June 18 conference call. And sure enough, FedEx Trade Networks is trying to attract new customers just as FredEx said.
-- June 25
Ohio Finds FedEx G/HD Drivers are Employees; Company Appeals
According to Bloomberg:
Kenneth Kies, a Washington tax lawyer and lobbyist whose firm has been paid $540,000 by UPS since 2002, sent Ohio officials a 562-page report in December 2006 alleging that FedEx misclassified truck drivers as contractors. A copy of the report, including a cover letter in which Kies asked for confidentiality, was released to Bloomberg News by Ohio officials.
``We took it and opened our own investigation,'' said Judi Cicatiello, Ohio's unemployment compensation deputy director. She said it was ``very'' unusual to get such detailed allegations. Her agency determined in May 2007 that the drivers were employees and FedEx owed $654,000 in taxes and interest. The company is appealing.
Must include Ohio in the list of "approximately 25 state tax and other administrative proceedings that claim that the company's owner-operators should be treated as employees, rather than independent contractors" that FedEx admitted to in its March 2008 quarterly SEC filing.
-- June 24
FedEx Officers on Ground Legal Challenges
FedEx Corporation held its quarterly conference call on June 18. The full transcript is available at SeekingAlpha.com.
Management painted a bleak picture for the corporation overall. There were some very tough questions posed by analysts and reporters.
Especially on the Ground segment:
Ed Wolfe - Wolfe Research
Can we talk a little bit about the Ground side? Ground operating income is down 26% and the margin at 750 basis points of year-over-year deterioration seems the worst since you've owned this business year-over-year. The fuel impact is great but should be less at Ground. Can you talk to what's really driving what's been a slow decline at Ground at profitability?
David F. Rebholz
First of all, let me point out it's not directly related to your comment but I think it's important. I'm extremely proud that FedEx Ground has achieved an all-time record service level both quality and unplanned service in 98.5 and what's important about that is we now deliver more than 56% of our packages in two days or less and 23% of the Ground packages are delivered the next business day. And you're aware of the fact if you follow us closely that part of our investment this past year was to speed up the lanes and recognizing some of the fundamental changes that have already been discussed. So we're very proud of having about a 13% advantage over UPS. Fuel was singularly the largest absolute dollar difference in the quarter and I think it has already been stated by Alan we did have costs related to the contractor initiatives that we've talked about in the past which come in two flavors - the conversion which I'm proud to say we are completed in California and some additional incentives for our multi-work area contractors. Purchase transportation and other cost lines are really where those numbers reside. The net of it, Ed, is we had a record fourth quarter last year at plus 17% and from a comparable basis along with these investments and one-time costs, I think we have performed extremely well inclusive of our improvement in our service offerings.
Ed Wolfe - Wolfe Research
Dave, can you give more sense in terms of the conversion costs? How much costs are still in front of you? How much of this is ongoing and what percent nationally of the drivers are now single contractors versus multi-route franchisees?
David F. Rebholz
Well, Ed, first of all the bulk of the costs from this conversion are in our numbers with the exception of the trailing [MWAs] in the fourth quarter so there will be a slight amount moving into the first quarter but the bulk of the numbers are baked into our base right now. We've had a substantial improvement in multi-work area contractors. Today if you look at the multiple work areas, they roughly are about 3,500 of our contractors, 3,600, are in control of about 10,000 of the service areas. Single work areas are about 7,600 for the organization and, of course, they are one-for-one even though they periodically employ their own employees for peak times, etc. We've had a substantial improvement in the MWAs with the last 500 additions all being 100% MWAs and as I mentioned out of the 489 single area work contractors in California, 410 of them have converted to multiple work area performance. So we have the vast majority of our contractors that have converted and our ongoing growth is in the multi-work area. Our long-term goal is to continue to reinforce that part of the model.
William Greene - Morgan Stanley
I think you're talking to the IRS this quarter. I don't know if it was in June or May, but can you give us an update on how those talks have gone?
Christine P. Richards
We've started those conversations. At this point in time there's a good chance they'll continue on into the first quarter. We're still at the audit level and depending upon the outcome at that level, we will then see how we go forward.
-- June 20
ATA Airlines Sues FedEx for Cancelled Contract
FedEx has its fingers in lots of pies.
Although the company is recognized primarily for its delivery services for the public, FedEx has long been a large contractor for the federal government and military. FedEx in 2007 was the 35th largest federal contractor and 25th largest contractor for the Defense Department alone.
FedEx has a line of business where air passenger services and "urgent missions to move mine resistant, ambush protected vehicles" are provided to the Department of Defense to ferry servicemen and women around the globe. The "Federal Express Charter Programs Team Arrangement" seems to be a consortium of FedEx and other airline and air cargo companies and is one of many such "teaming arrangements" that receive DoD contracts.
Up until very recently, ATA Airlines was a member for many years of the "Federal Express Charter Programs Team Arrangement" contract. Early in 2008, FedEx notified ATA that they were out of the teaming arrangement. Due to this loss in projected revenue, ATA management felt they had no choice but to file for bankruptcy and immediately cease operations. This led to hundreds of passengers - including many returning military personnel - stranded. More than 2,200 ATA employees lost their jobs.
Now, ATA is suing FedEx for deciding to not include ATA in the next go-round of the teaming arrangement contract. This lawsuit must be in the proper context as part of the ATA bankruptcy proceedings. But certainly some decisions taken in Memphis will be scrutinized in the course of this suit.
-- June 13
FedEx Ground Sues Washington State
If FedEx is so conscious of its brand, it seems odd to go around suing state governments and keeping your name in the news.
FedEx Ground is now suing the Washington Department of Labor and Industries to obtain a copy of a report analyzing its "independent contractor model."
FedEx Ground states in the lawsuit that it was contacted by an employee of the labor department in late 2006 or early 2007 who stated that the department had received a report addressing FedEx Ground's classification of "pick-up and delivery drivers" from an entity named Clark Consulting.
In February 2007 FedEx Ground said it issued a Public Disclosure Act request to the labor department seeking a copy of the report and information about who compiled it. The labor department originally refused to release the report, FedEx Ground said in its filing.
"While the department eventually produced a copy of the report, it unlawfully redacted and continues to withhold key information," FedEx Ground added in the suit.
We'll try to track down the complaint in this case. And we'll watch the proceedings.
At a minimum, this lawsuit must mean that Washington has to be added to the list of "25 state tax and other administrative proceedings that claim that the company’s owner-operators should be treated as employees, rather than independent contractors."
-- June 11
Review of The Big Squeeze
There seems to be a growing chorus of critics - from those of the political left and the political right - that FedEx Ground's contractor scam is the ailment of a larger sickness in the American economy.
The New York Times journalist Steven Greenhouse covers the "working" beat for the newspaper. An excerpt from his most recent book talked about Ground's abusive contractor model and its impact on one driver.
Greenhouse's book takes a broader look at the daily struggles of working Americans. Reviews of his writing and thesis are spreading on the web.
-- June 06
"Great Shipper, Dumb Owner"
After what seemed like a re-organization announcement per year, FedEx has another stylistic change for Kinko's. Or should we say, Office.
FedEx Corporation is taking a sizable write-down as it plans to turn its retail storefront brand into "FedEx Office."
Something has been afoot at Kinko's since at least last year's shareholder's meeting. Prior to September 2007, Kinko's was a stand-alone reporting segment of FedEx Corporation. Investors could see how Kinko's was performing. But last September, FedEx management decided to place Kinko's under something called "FedEx Services." This jiggling of the reporting structure was under-reported at the time because the FedEx Ground "California Plan" made the headlines .
But investors have watched the Kinko's acquisition weigh heavily on FedEx Corp performance. And some observers are making more noise about it.
-- June 04
"Shareholders Latest to Sue FedEx Over Drivers"
It certainly must be a long line of people suing FedEx Corp and FedEx Ground for misclassifying drivers.
Only the 'latest' is a shareholder - the Plumbers and Pipefitters Local 51 Pension Fund - who is suing the company's Board of Directors for "breach of fiduciary duty, abuse of control, gross mismanagement, corporate waste and unjust enrichment." The title of this post comes form a newspaper story with the same title.
The Reuters beat reporter for transportation also wrote an article that was picked up by some web sites.
FedEx's lawyers must be very busy.
-- May 09
New Resource: MDL Class Notice Order, Plaintiff Common Proof Brief
Following Judge Miller's certification orders for 19 states on March 25, things just might be speeding up in the multi-district litigation.
Last week, Judge Miller issued an order outlining the content and timing for the class notice order that will be sent to all potential class members. The order centered on the national ERISA claim and the KS state claim but will seemingly be applied to all other state class claims. Some key takeaways from the order: there will be one class notice (not two ie a separate notice for ERISA and second notice for state claim), there will be an opt-out process but there will not be an opt-out form included with the notice, language that threatens potential discovery by FedEx will not be included and FedEx will not insert propaganda into the notice.
On that last item, Judge Miller said:
FedEx seeks to add information about FedEx's right to express their opinion about the lawsuit. While FedEx believes it needs to express to the class that it has a right to express its opinion, that is not the purpose of class notice. Class notice is meant to inform the class of their rights, but it is not meant to protect the rights of the defendant. (See In re Brand Name Prescription Drugs Antitrust Litigation, 1995 WL 23058 at *1.) Consequently, this Court declines to entertain FedEx's suggestion that the notice include information about FedEx's right to express its opinion. (Original emphasis)
As for the timing, the final notice will be approved and an order directing the notice will be mailed will be sooner rather than later.
Based on this class definition, this Court certified class actions for the Kansas and ERISA case. FedEx had the opportunity to raise arguments about the insufficiency of this definition while this Court considered FedEx's opposition to Plaintiff's motions for class certification. This Court will not revisit whether the definition of the class is appropriate as a basis to delay class notice. In summary FedEx has not offered any persuasive justification for delaying the issuance of class notice at this time.
Another FedEx delay tactic. Another FedEx loss.
The second filing is the Plaintiff's brief on common proof. This brief lays out some of the evidence that the drivers' lawyers will submit to prove the control over the drivers by FedEx to support a ruling that finds employee status. Again, the drivers' lawyers here will offer evidence that goes to the common experience of drivers in the states where class claims have been certified.
There is a good discussion on the "individual versus policy" control factors over at FedExaminer.com for anyone who is interested.
-- April 11
New Resource: Washington state class action case
This state case on the misclassification of FedEx Ground/HD drivers slipped past us until the company talked about it in its March 20 SEC filing.
This Anfinson case in King County (Washington) Superior Court has traveled a long and winding road between Washington court and the USDC in Northern Indiana.
But the Superior Court Judge certified the class in January 2008 as "all persons who performed services as a pick up and delivery driver or "contractor" for defendant during the period (Dec. 21, 2001 through Dec. 31, 2005) who signed (or did so through a corporate entity) a FedEx operating agreement and who handled a single route at some point during the class period; excluding persons who only performed or filed one or more of the following positions during the class period: multiple route contractors, temporary drivers, line-haul drivers or who worked for another contractor."
In light of the March 25 class certification orders in the MDL, the history of Anfinson and its long journey is interesting to say the least.
-- April 04
Fred Smith Put $7 Million in His Pocket This Week
Just because the headline for the recent news article that noted Fred Smith's stock market transition was so clearly misleading, we set out to look more closely.
In a Form 4 filed with the SEC Monday, the founder of the shipping giant bought the shares for $31.98 each, spending $9.6 million on the acquisition. Smith then disposed of 175,800 shares at prices ranging from $92.69 to $93.01.
FredEx's stock sales were in the open market. So he exercises call options to buy the stock at $31.98, costing $9.6 million. Then he sells 175,800 shares at an average of, say, $92.80 which nets him $16.3 million.
FredEx has a realized gain of $6.7 million and an unrealized gain of an additional $8 million at current prices. Of course, he has to pay capital gains taxes but he just put $7 million pre-tax into his pocket.
-- April 03
New Resource: MDL Class Cert Orders and Denials
There has been a back and forth exchange of press releases from FedEx and from the drivers' lawyers. We've uploaded Judge Miller's order from March 25 to our Multi-district Litigation resource page.
It seems like this split the baby in two-thirds ruling is making no one completely happy. Drivers who are named plaintiffs will know the most about the views and developing strategies of their lawyers.
As for FedEx, two-thirds of a loss still is a loss. This isn't NHL hockey. The Orwellian talk of 'future of the majority' is the best spin they could muster.
To understand the size of FedEx's misclassification problem, one can ignore the company's yes-men and spokespodpeople but one must pay attention to the company's lawyers. Here is what the FedEx Corporation said in its quarterly regulatory filing (enter FDX and read the latest 10-Q on Edgar) with the Securities and Exchange Commission on March 20:
Independent Contractor - Estrada. Estrada v. FedEx Ground is a class action involving single-route contractors in California. In August 2007, the California appellate court affirmed the trial court's ruling in Estrada that a limited number of California single-route contractors (most of whom have not contracted with FedEx Ground since 2001) should be reimbursed as employees for some of their operating expenses. The Supreme Court of California has affirmed the appellate court's liability and class certification decisions. The case has been remanded to the trial court for reconsideration of the amount of such reimbursable expenses and attorneys' fees. We do not expect to incur a material loss in the Estrada matter.
Independent Contractor - Other Lawsuits and State Administrative Proceedings. FedEx Ground is involved in approximately 45 other purported class-action lawsuits (including two that have been certified as class actions), several individual lawsuits and approximately 25 state tax and other administrative proceedings that claim that the company's owner-operators should be treated as employees, rather than independent contractors. Most (approximately 40) of the class-action lawsuits have been consolidated for administration of the pre-trial proceedings by a single federal court, the U.S. District Court for the Northern District of Indiana. With the exception of recently filed cases that have been or will be transferred to the multidistrict litigation, discovery and class certification briefing are now complete.
In October 2007, we received a decision from the court granting class certification in a Kansas action alleging state law claims on behalf of a statewide class and federal law claims under the Employee Retirement Income Security Act of 1974 on behalf of a nationwide class. The court also required the parties to submit briefs on the issue of whether the decision should be applied to the other actions pending class certification determination in the multidistrict litigation. In January 2008, the U.S. Court of Appeals for the Seventh Circuit declined our request for appellate review of the class certification decision.
In January 2008, one of the contractor-model lawsuits that is not part of the multidistrict litigation, Anfinson v. FedEx Ground, was certified as a class action by a Washington state court. The plaintiffs in Anfinson represent a class of FedEx Ground single-route, pick-up-and-delivery owner-operators in Washington from December 21, 2001 through December 31, 2005 and allege that the class members should be reimbursed as employees for their operating expenses and should receive overtime pay. The Anfinson case is scheduled for trial in June 2008. The other contractor-model lawsuits that are not part of the multidistrict litigation are not as far along procedurally as Anfinson.
FedEx Ground is also involved in several lawsuits, including three purported class actions, brought by drivers of the company's independent contractors who claim that they are jointly employed by the contractor and FedEx Ground.
Adverse determinations in these matters could, among other things, entitle certain of our contractors and their drivers to the reimbursement of certain expenses and to the benefit of wage-and-hour laws and result in employment and withholding tax and benefit liability for FedEx Ground, and could result in changes to the independent contractor status of FedEx Ground's owner-operators. We believe that FedEx Ground's owner-operators are properly classified as independent contractors and that FedEx Ground is not an employer of the drivers of the company's independent contractors.
Given the nature and status of these lawsuits, we cannot yet determine the amount or a reasonable range of potential loss, if any, but it is reasonably possible that such potential loss or such changes to the independent contractor status of FedEx Ground's owner-operators could be material. However, we do not believe that any loss is probable.
Independent Contractor - IRS Audit. On December 20, 2007, the Internal Revenue Service informed us that its audit team had concluded an audit for the 2002 calendar year regarding the classification of owner-operators at FedEx Ground. The IRS has tentatively concluded, subject to further discussion with us, that FedEx Ground's pick-up-and-delivery owner-operators should be reclassified as employees for federal employment tax purposes. The IRS has indicated that it anticipates assessing tax and penalties of $319 million plus interest for 2002. Substantially all of the IRS's tentative assessment relates to employment and withholding taxes for the 2002 calendar year and, if paid by the company, would be fully deductible. Similar issues are under audit by the IRS for calendar years 2004 through 2006. We are preparing to meet with the IRS audit team to review their tentative assessment and to provide an initial response. We expect that the meeting will occur during the fourth quarter of 2008 and that a final resolution of this matter will not occur for some time. We believe that we have strong defenses to the IRS's tentative assessment and will vigorously defend our position, as we continue to believe that FedEx Ground's owner-operators are independent contractors. Given the preliminary status of this matter, we cannot yet determine the amount or a reasonable range of potential loss. However, we do not believe that any loss is probable.
Soundbites are meaningless. The damage control is hard to mask. State court judges, federal court judges, National Labor Relations Board, state tax officials, and the IRS are putting the lie to FedEx's claim that a small group of former drivers are 'wrong' and the company's 'contractor' scam is right.
FedEx Ground and Home Delivery drivers need to keep their attention on the larger picture.
-- April 01
Attacking FedEx Ground from the Right
Here's a criticism of FedEx Ground's contractor scam that comes from the right/libtertarian point of view.
But first, we should mention the other companies which use "contractors" that Fred Smith has cited positively. FredEx is trying to muddy the waters with apples:oranges comparisons with some of these but is also playing with fire by id'ing other companies that could draw the IRS stink eye.
Fred Smith in Jan 10, 2008 conference call: "There are many many major corporations in this country who use independent contractors - here are just a few of them: AllState, DirectTV, Dynamex, NASCAR, Publishers Circulation Fulfilment, Raymond James, State Farm, Velocity Express, Yellow Cab, Mary Kay, Avon, Lowes Home Depot, Mac Tools and so on down the line."
FedEx-cess: Inviting In the Big, Bad Government Wolf
By Chuck Muth CNSNews.com Commentary
March 17, 2008We all know a few bad apples can spoil the whole barrel. And never is this saying truer than when it comes to a rogue company or industry abusing its privileges, thereby inviting the government to stick its nose even further into the business of business. Think Enron, and the resulting compliance nightmare known as Sarbanes-Oxley. Or just ponder the red-tape regulation-palooza headed the mortgage industry's way this year.
Which is why the nation's self-employed independent contractors need to be aware of the dangerous line FedEx is walking these days. The regulatory wolf rabidly believes that when it comes to imposing new controls on American businesses, it absolutely, positively has to be there overnight. And FedEx is inviting the hairy one with big fangs in.
At issue is the difference between being a self-employed independent contractor and a company employee. Generally speaking, independent contractors perform various services for various people. Employees work directly for one company. Independent contractors pay their own taxes and provide for their own benefits, such as health insurance and retirement. Employees have taxes deducted from their paychecks and receive unemployment benefits and workers comp.
Employees cost a company more money because of this, which is why many companies choose to outsource certain services to independent contractors. For example, a business might contract out grounds-keeping to an independent lawn care service rather than hire a full-time gardener. The independent lawn care owner, providing his services to various businesses, is self-employed; the full-time gardener is an employee.
The government, especially the IRS, doesn't much like independent contractors. If they had their way, every worker would be designated an "employee," thus falling under more of their direct control and scrutiny.
For their part, independent contractors don't much like government. They prefer to be, um, independent. Which is why an abuse of the independent contractor option by FedEx should be of grave concern to all true independent contractors.
At the heart of this matter is FedEx's claim that its delivery drivers are independent contractors and not employees. This claim seems laughable on its face, even for those who aren't familiar with the "official" definition of independent contractors. Let's face it, the drivers drive FedEx trucks, wear FedEx uniforms and identify themselves as FedEx representatives. I mean, come on. If it walks like a duck and quacks like a duck, it's not a gorilla, right?
<snip>
Or putting it even more plainly, the Appeals court stated flatly, "We affirm the finding that the drivers are employees." Period. And if FedEx continues trying to call a duck a gorilla, it will endanger the rights and prerogatives of all legitimate independent contractors.
This is not to say I agree with the government's position on this issue. In my opinion, every worker should have the right to freely enter into whatever kind of employment relationship the worker and the employer deem acceptable to both parties with no government intrusion whatsoever. But the reality is that Big Brother already has its hooks in the employment market and there are those in Congress who would like to further put the squeeze on independent contractors.
FedEx's abuse of the independent contractor provision will only add fuel to the regulatory fire. They should cut their losses and change their employment practices before the big, bad wolf comes for the rest of us.
-- March 17
Are you paying your boss's taxes?
There are potentially hundreds of thousands of people who work as "contractors" but are legally employees. In the tech industry, Microsoft became the poster child for misclassification because of the Vizcaino verdict on permatemps. Now FedEx is becoming the poster child for misclassification. "If your boss tells you not only what to do but how to do it, the game is over. You're an employee."
-- February 20
New York Crackdown on misclassification
Following Governor Spitzer's executive order to target employers that misclassify their employees, the New York Department of Labor got serious and started investigations. In some cases, they are raiding companies after getting tips from employees. "Labor Commissioner Rebecca Smith said the state planned more sweeps that would look at not just the construction and restaurant industries, but also at car washes, janitorial firms and trucking companies."
The New York Department of Labor has listed a number of ways to send tips on misclassification to the proper authorities:
Misclassification of workers occurs when an employer improperly treats an individual as an independent contractor instead of as an employee. Because of this labeling, some employers attempt to avoid complying with unemployment insurance, workers’ compensation, social security, tax withholding, temporary disability, and minimum wage and overtime laws that protect workers. Paying workers off the books also fraudulently deprives workers of the protections they deserve. These practices also put law-abiding business at a competitive disadvantage because of the significant unemployment insurance and workers’ compensation expenses they incur for their employees.
The Joint Enforcement Strike Force includes staff from: the Department of Labor, the Attorney General’s Office, the Department of Taxation and Finance, the Workers’ Compensation Board and the New York City Comptroller’s office.
If you believe that you have been misclassified by your employer and want to file a complaint, please contact the Task Force in the department's Employer Fraud Unit, 24-hours a day at 1-866-435-1499. You may also contact the Task Force, weekdays at 518-485-2144 between 8am and 4pm or send us an email to
Please complete the Tip Sheet and fax it to 518-485-6172 or mail it to:
New York State Department of Labor
Liability and Determination, Fraud Unit
W.A. Harriman State Office Campus
Building 12 - Room 356
Albany, New York 12240If you think an employer is committing fraud by misclassifying its workers or is committing violations of New York State laws related to the employment of workers, it is important that you let us know about it. All allegations of fraud and violations are taken seriously, and you can remain anonymous. Please include as much information as possible. All information will be maintained in a fully secure environment.
FedEx Ground and FedEx Home Delivery drivers in New York should make good witnesses.
-- February 12
Worcester Newspaper on Northboro
Although the headline writer at the Worcester newspaper was fooled, the reporter filed a piece that puts the FedEx drivers and Local 170 decision to not hold the Feb 1 election in the proper context.
-- January 30
Northboro Election Won't Proceed on Feb 1
After more than 2 years of delay and repeated illegal actions by FedEx in Northboro, Local 170 had to put off the election originally planned for Feb 1.
Much of what happened in Northboro was also documented in the ARAW/LCCR report "Fed Up at FedEx" with statements by a number of the present and former drivers from that terminal.
The Associated Press put the decision to not go ahead with the election in the proper context. The drivers in Northboro continue to cooperate with the Massachusetts Attorney General in her investigation into FedEx Ground's misclassification of its workforce in the Commonwealth.
This is a step so that we can come back to Northboro when the conditions are safer for the drivers and they feel free to vote without intimidation.
-- January 29
Appeals Court Panel Unanimously Rules Against FedEx Ground in MDL
After the federal judge in the multi-district litigation certified the class for claims under the Kansas and ERISA laws, FedEx unsurprisingly went to the U.S. Appeals Court for the 7th Circuit to ask the class certification order be reviewed by the higher court. The three judge panel for the 7th Circuit unanimously denied FedEx's request. Like a dog chasing its own tail, FedEx is stuck in the cycle of appeal and lose, appeal and lose, appeal and lose.
And what did FedEx have to say about their latest loss in courts? Nothing of substance just more denial .
In a decision received today, the United States Court of Appeals for the Seventh Circuit declined to hear the request of FedEx Ground, an operating unit of FedEx Corp. for interlocutory review of the class certification decision in the Kansas case pending before the United States District Court in Indiana. The decision had granted class certification on the Kansas state claims and a national ERISA claim.
The court did not rule on the validity of the contractor model and has not decided class certification in any other multi-district litigation case. FedEx Ground will continue to vigorously defend the MDL.
This procedural ruling does not change any aspect of the FedEx Ground operation and we will continue to provide the world-class service our customers have come to expect.
The most likely next step in this case is that the federal judge in Indiana will certify most if not all of the other state claims. The stakes will get raised even higher for FedEx after that.
-- January 23
Fred Smith's "Trust Me" Message to FedEx Employees
If Fred Smith was Tom Cruise and he wanted to make a video about the Ground independent contractor scam, he'd make a promo video like Cruise's video.
Instead, Fred Smith sent this email message to FedEx employees. An Express guy sent it to us. This follows FDX's 'come to salvation' non-event call last week.
From:
Sent: Tue 1/15/2008
Subject: Message from Fred Smith
I want to take this opportunity to thank you for closing out another outstanding Peak season with record-high volumes and service levels. BZ to everyone for delivering such a strong performance - particularly in the face of such difficult economic conditions.
I also want to address some speculative and misleading reports that you may have seen or heard about in recent weeks related to FedEx Ground. I want to personally assure you that this business is operating at very high levels of service and will continue to do so in the future. We have full confidence that our business model is good for our owner-operators as well as our customers. The FedEx leadership team is highly focused on the marketplace challenges facing FedEx Ground and fully committed to our business strategy, our customers and to you.
First and foremost, the bedrock of this company is the Purple Promise, which says we will make every FedEx experience outstanding. At the heart of the Purple Promise is our people and you are the ones who make it come alive every day.
FedEx remains true to our core value of people first and always takes that value into account during the decision-making process. We will continue to provide our team members with opportunities to grow and benefit from the company's success.
Second, I have the utmost confidence in our FedEx team. We are used to dealing with complex issues successfully. Being able to adapt to changing environments and business conditions has been a hallmark at FedEx. We thrive on challenges and opportunities. Our excellent track record over the past 35 years demonstrates our team's intelligent and balanced approach to any challenges we face.
One of the great strengths of FedEx is the ability to adapt quickly to changes in the marketplace. For example, we've been able to expand rapidly at FedEx Kinko's and FedEx Ground, while at the same time building strong networks in China and India, two of the fastest-growing economies in the world. We will continue to remain agile and resilient enough to respond to changing customer needs and marketplace conditions with new innovations and services. We know that a company that does not adapt does not succeed, and we intend to remain a powerful force in the marketplace for years to come.
Finally, one of the most important assets we have is our shining FedEx reputation. An excellent reputation enables us to attract and retain the best and brightest human talent, build customer loyalty and grow our business. Some groups are trying to chip away at the reputation we have all worked very hard to build over the years. As ambassadors of the FedEx brand, you have the greatest power to deflect their efforts. By continuing to deliver seamless service to our customers and collaborative support to team members, you prove that FedEx remains one of the best companies in the world. Once again, thank you for your commitment and hard work. I am deeply grateful to have each and every one of you on our team.
To keep you current on what we're communicating to our external stakeholders, I'd like to share the following statement. These were my opening remarks during a conference call with analysts and reporters last week to address some of the misinformation related to the recent decision by the IRS related to our FedEx Ground independent contractors.
"Last time we chatted was the morning of December 20 during our quarterly earnings call. Later that day, we got a preliminary notification from the IRS about a preliminary finding related to the classification of our owner-operators at FedEx Ground. The next day, we filed our 10-Q. Over the holidays, we received some questions, which we answered and sent out some more information. The reason we are having this call today is primarily to give us the opportunity to address the speculative, and, in some cases, unfounded reporting regarding this issue. I wanted to give you a chance to catch up on this directly with me and our management team.
First, I want to tell you that today, tomorrow and every day going forward, our customers will continue to receive the level of "absolutely, positively" service that FedEx has delivered for 35 years. That's true in every sector of our business.
Specifically to our FedEx Ground segment, we have full confidence that we will continue to provide excellent service. We just finished our Peak season and at Ground, we delivered record volumes and we posted our best service levels ever. Morale at FedEx Ground remains at very high levels.
Now I know there have been a lot of questions recently about our Ground business. We believe the business model we use is good for our contractors and good for our customers. As you know, there are millions of people in this country who have chosen to work for themselves. I personally believe that's what freedom is all about. We've given that entrepreneurial opportunity to thousands of contractors - to own, grow and expand their own business and provide financial security to themselves and their families. This model provides quality service at a very competitive price for our customers.
I've been in this business for 35 years, and I know that continuing success in any business means constant change and evolution to meet customer needs. Let me give you one recent example. Last fall in California, we announced incentives for contractors to become multi-route contractors or sell their routes. Virtually all of our 735 single-route contractors accepted this offer. From the point of view of our California customers, this transition has been business as usual. I want to point out that on a national level, more than half of all Ground packages are delivered through multi-route contractor arrangements, so this isn't new to us. This is only one of many ways we have adjusted our business over the years to meet evolving conditions and customer needs. Our track record on this is very clear. We will continue to do what it takes to make us the ground shipper of choice for customers.
On this matter with the IRS preliminary finding, as we said in our 10-Q, we believe that no loss is probable. We are surprised at the preliminary finding because in 1994, the IRS—through a settlement agreement and ruling letter - affirmed FedEx Ground's treatment of the owner-operators who perform pick-up and delivery services as independent contractors for tax purposes. We have relied on that 1994 ruling and we strongly disagree with their tentative conclusion.
IRS proceedings are often very long processes, with final resolution years away. Some of you will remember a disagreement we had with the IRS over jet engine maintenance. That took more than ten years to resolve, and in the end we won. In terms of the current IRS matter, we are confident in our position.
I'm sure you've got some questions and we'll get to those shortly. Please understand, however, that although we are actively managing these issues, we will not be able to discuss the specifics at this time given the proprietary and strategic nature of these issues.
You know, our top management team has been together a long time, and we are used to dealing with complex issues successfully. In the past few years for example, we've put together networks to offer superior value propositions to our customers in two of the fastest-growing economies in the world - China and India. That's not a simple thing to do, but it's just part of how we keep evolving FedEx. Certainly we will see continuing evolution in our U.S. business as well. We believe our track record over the last 35 years demonstrates our team's ability to deal successfully with challenges we face. What won't change is the commitment of 290,000 FedEx people to meet the evolving needs of our customers."
-- January 18
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