Business Model for Ground Operations in New Hampshire: The Latest in Costly Gambles for FedEx

WASHINGTON -- The new FedEx (NYSE: FDX) business model for New Hampshire Ground operations represents the company's latest strategy to skirt laws meant to reign in the misclassification of independent contractors and introduces new concerns for investors.

"FedEx has exposed investors to exorbitant legal and tax liabilities by misclassifying drivers as independent contractors across the country for years," said Teamsters General President Jim Hoffa. "This new scheme to evade their responsibilities to the men and women who deliver for the company's most profitable business segment will continue to expose investors to costly problems."

According to company documents, New Hampshire contractors will individually negotiate their own service contract with the company rather than sign the FedEx-provided Operating Agreement suggesting that the company will give up important controls that ensure customer service and operational efficiency.

The company claims that these contractors will not be required to use FedEx-approved drivers, trucks, scanners, or uniforms; they will be individually responsible for managing all of the logistics of their service areas including meeting the complex demands of seasonal volume fluctuations; and they will have the right to refuse pick-ups and deliveries under certain circumstances.

If implemented as proposed, the FedEx New Hampshire plan is similar to the chaotic Independent Cartage Carriers (ICC) model DHL Express used for half of its U.S. network. That model, which DHL inherited from Airborne Express, relied on more than 600 different ICC's (employing approximately 12,000 drivers) at a given time. The tight margins dictated by this type of relationship made for high turnover among the ICC's as well as the drivers. This past fall DHL Express announced it was leaving the domestic US market after sustaining losses of $1 billion in each year since the Airborne purchase.

"FedEx investors cannot afford to gamble on another scheme that will either add to the company's legal and regulatory problems or undermine customer service in this competitive industry," Hoffa said.

The International Brotherhood of Teamsters was founded in 1903 and represents more than 1.4 million hardworking men and women throughout the United States, Canada and Puerto Rico.


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