Driving test: FedEx faces labor problems

FedEx Corp. referred to the contract-driver dispute in a Securities and Exchange Commission report early this year saying the company "cannot yet determine the amount of potential loss in these matters, if any."

Despite FedEx Ground's confidence, court fights over the use of independent contractors are complicated, said Gary Johnson, whose Fort Wayne, Ind., law firm advises businesses on labor matters.

The arguments center on how much independence contractors have. If work is too tightly controlled, courts can order employers to hire them with the same benefits and legal protections other company workers enjoy.

"It's always a balancing test," Johnson said.

Many companies run into legal trouble, he said, when they try to categorize workers who should be on regular payrolls as temporary employees or independent contractors.

"The true independent contractor is the guy you hire to put a new roof on your house," he said. "You've hired him for a job to be done, and you exert very little control over how he does it."

FedEx cranked up its competition with Atlanta-based UPS in 1998 when it bought several trucking operations, including RPS Inc. which later became FedEx Ground. RPS had relied on contract drivers since its creation in 1985.

Drivers for UPS are company employees driving company-owned trucks.

FedEx Express is still the heart of FedEx Corp., and the airline has a fleet of 40,000 trucks, with purple and orange logos, driven by company employees.

The Colography Group Inc., an Atlanta-based company that advises clients on shipping and logistics, says about half the packages delivered by FedEx in the United States are now carried by FedEx Ground.

Ted Scherck, Colography Group's president, said customers don't care who owns the trucks that deliver their packages.

"I don't think the marketplace issues would be as severe as just the institutional disruption," he said. "You would, in effect, have to figure out how to set up a whole new work force, and that's not an easy thing to do."

Independent drivers who own their own trucks have long played a major role in the shipping industry, Scherck said.

"I believe the vast majority of FedEx's owner-operators consider themselves just that," he said. "They don't consider themselves employees."

FedEx Corp. has often been praised as a good company to work for, but it has had labor troubles before.

It has steadfastly held off attempts by the Teamsters to unionize company drivers, and when the expansion into trucking began, FedEx was wrapping up a bitter five-year fight with its airline pilots.

The pilots, the corporation's only U.S. employees represented by a union, threatened a Christmas-holiday strike in 1998 but backed down when FedEx started leasing planes and flight crews from other companies.

While the struggle with FedEx Ground drivers is not about organized labor, "it's really a union demand without a union," Ciscel said. "These truckers are trying to tell them how to run FedEx Ground, and they don't like it."

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