A trade association formed in August to represent the interests of driver contractors at parcel delivery firm FedEx Ground disbanded on Friday amid allegations by the group’s founder that the FedEx Corp. unit threatened to strip its leaders of their contracts if they kept the group alive.
In a statement distributed Thursday night, the 10-member leadership committee of the Trade Association for Logistics Professionals (TALP) said the group was not the “appropriate vehicle” to promote effective dialogue between the FedEx (NYSE: FDX) unit and the 6,000 nationwide delivery contractors who operate exclusively for it. The group said that “better options exist” to meet its objectives. It did not elaborate.
In the statement, the group called on contractors to work collegially with FedEx Ground to achieve mutually beneficial outcomes. An undetermined number of contractors have voiced concerns about their financial situation amid rising costs and flattening delivery demand.
FedEx Ground has acknowledged the contractors’ concerns and has renegotiated an unspecified number of contracts, most of which run for 12 to 18 months, to provide some degree of financial cushion.
According to a person familiar with the matter, FedEx Ground has also offered an unspecified number of contractors more compensation to support their peak-season investments than they had originally received. Under the “Schedule K” formula, contractors receive additional payments from the unit to ensure they have adequate equipment and staff to manage holiday volume spikes.
The new funding came out of nationwide discussions between the unit and many of its contractors and may have been influenced by more optimistic holiday demand projections from several large retailers that are FedEx Ground customers, the person said.
The trade group’s decision to disband came as a surprise to its founder, Spencer Patton, who resigned from the group on Oct. 25. In an email to FreightWaves on Friday, Patton said he was not consulted prior to the announcement and that the remaining officials made an “independent decision” to resign from the group, effectively terminating it.
He had hoped his departure would lead to constructive dialogue between the company and the group. However, FedEx Ground made it clear it would not talk with any collectively organized contractor group, Patton said. The unit’s CEO, John Smith, had stated as much a couple of months ago.
In his email, Patton said the unit “actively intimidated” committee members by warning they had a “target on their backs and threatening their contracts if they remained members.” FedEx Ground declined comment on the TALP actions or Patton’s allegations.
The group had approximately 600 members at the time Patton resigned.
In late August, FedEx Ground stripped Patton, who is based in Nashville, Tennessee, of his 10-state route network. The unit said at the time that its action was based on Patton’s businesses’ “continued failure” to meet the terms of their service agreements with FedEx Ground, despite the company providing them opportunities to do so.
Patton and the company had been at loggerheads since the summer, when Patton began a high-profile effort to call attention to the financial plight facing many contractors. He had warned that, unless FedEx Ground increased the compensation to its contractors, about one-third would have trouble surviving through the peak season or the balance of 2022.
It appears, however, that the vast majority of contractors will remain operational at least through peak. Executives at the parent said in mid-September that 96% of contractors had agreed to “Schedule K” compensation.
It is unclear how many contractors were TALP members. According to the person, TALP fell off many contractors’ radar screens after Patton was stripped of his routes. In addition, contractors who run routes for companies such as Amazon.com Inc., DHL e-Commerce and OnTrac said they are facing the same financial squeeze as FedEx Ground contractors, the person said.