FedEx Fighting Contractor Lawsuit Over ‘Abusive’ Tactics

A former delivery contractor for FedEx Ground filed a lawsuit claiming unfair treatment and “abusive” and “deceptive” business practices that violate U.S. anti-racketeering law.

Pynq Logistics Services, which operates along the California-Oregon border, sued the parcel giant on Nov. 14 in a California federal court, requesting a judicial determination that its relationship with FedEx Ground is that of an employee rather than an independent contractor due to the “near complete control” exerted by the courier.

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The plaintiff claimed in a 98-page complaint that FedEx fraudulently induced Pynq to enter into contracts for FedEx Ground delivery routes in violation of the Racketeer Influenced and Corrupt Organizations Act (RICO). The former contractor also alleged that the company committed negligent misrepresentation, among other charges, and violated the California Unfair Competition Law.

Pynq claims Fedex Ground allegedly deceives and harms its roughly 7,000 contract delivery carriers by concealing or misrepresenting its operating polices in ways that make it nearly impossible to meet the company’s delivery standards.

By using contractors, FedEx Ground can shift employee and other expenses to third-party delivery providers, rather than pay the upfront labor costs—all while skirting the risk of having to own and operate more delivery vehicles. Other contractors have complained about this in the past, sparking the formation and dissolution of the short-lived Trade Association for Logistics Professionals (TALP) last year.

The RICO claims come as Pynq says it entered its contract with FedEx with the understanding that it would be independent, but was instead subject to controls that required it to function like an employee.

“This is a novel approach to attack the independent contractor relationship,” said Frank Botta, a former in-house attorney for ground package carrier Caliber System, Inc., which FedEx acquired in 1997 to develop its modern ground transportation business.

Botta, who is not involved in the FedEx-Pynq case, now defends companies facing legal challenges involving contractors as a partner at the Pennsylvania-based Lynch Law Group. He told Sourcing Journal that under the RICO Act standards, Pynq would have to prove a “pattern or practice of fraud, concealment and false promises.”

In 2021, Pynq spent nearly $1.13 million to purchase the rights to two FedEx Ground delivery areas with routes based out of FedEx stations located in Brookings, Ore. and Arcata, Calif. The firm says that when FedEx issued termination letters on both service areas in May 2023, the carrier allegedly sold one of them without the contractor’s consent or compensation. There wasn’t time to sell the second area, leading to a loss.

Pynq lost its contracts and was immediately replaced by another contractor that FedEx Ground
had already been working with, while FedEx had been leading Pynq to believe the contracts would be renewed, the complaint states.

Pynq is seeking monetary damages to be determined at trial, as well as additional civil penalties.

According to Botta, under the RICO Act and California Unfair Competition Law, Pynq could collect as much as three times the damages if they prove the claims were intentional.

A FedEx representative said the company is aware of the allegations and “will vigorously defend all of the claims in the lawsuit.”

In the complaint, Pynq said it reserved the right to pursue the case as a class-action lawsuit.

“The fact that this might turn into a class action case raises more concerns for FedEx, because the more plaintiffs you have, the more technical issues are going to be discussed, determined and reviewed,” Botta said. “This causes a lot more technical issues in defending the case.”

Botta noted that FedEx faced similar litigation in 2014 and 2015 stemming from multiple class-action lawsuits, which involved similar allegations that the ground unit misclassified drivers as independent contractors, when in reality they functioned as employees entitled to the benefits that come with that status.

The combined settlements of those cases cost FedEx roughly $466 million. At the time, FedEx Ground changed its operating structure so it would no longer deal directly with drivers, instead partnering with independent delivery businesses that could hire their own drivers and be responsible for investing in and managing their respective businesses.

Sourcing Journal reached out to Jeffrey Possinger, Pynq’s lead counsel, for comment.

FedEx has more immediate issues to handle in relation to its contractors amid a wave of recent carjackings and cargo theft impacting drivers and those at chief competitors like UPS, the USPS and Amazon.

The carrier issued a security alert to thousands of contractors Thursday, reminding them to prioritize the safety of their drivers and to enhance the vehicle security.

“This Peak season is showing an increase in unlawful activity, putting increasing concern on safety and security,” according to an alert viewed by The Wall Street Journal.