FedEx Change Makes Drivers Business Owners
Shrewsbury resident Marco Aurelio Teixeira has been a driver for Federal Express’s Northborough operation since last summer. For the past three months, he’s also been the owner of a business with four employees, and with all the management headaches, uncertainty and potential for profits that come with that status.
Teixeira is thrilled with his new situation, which he got thanks to a change in FedEx policy that requires its contracted drivers to form their own corporations and encourages them to pick up extra routes and hire other drivers. But to some, the changes are a way for the company to avoid the responsibilities that come with treating their drivers like full employees.
New Business Plan
In May, FedEx sent a letter to its drivers requiring that they incorporate their businesses within 180 days. They also have to be registered and in good standing with the states where they operate and treat anyone who works for them as an employee rather than a subcontractor. Drivers who complied were eligible for an incentive payment.
The company said the decision was the result of conflicts it’s had with several states over the classification of its drivers as independent contractors. One of those states was Massachusetts, where FedEx Ground was embroiled in a dispute with Attorney General Martha Coakley. In July, FedEx agreed to pay the state $3 million to cover payroll and unemployment taxes for drivers, as well as $195,000 to 13 drivers from the company’s facility in Northborough.
The disputes over alleged misclassification also involved unionization attempts.
Unions, including Worcester-based Teamsters Local 170, attempted to organize groups of FedEx drivers, and courts had delivered mixed verdicts over whether the drivers could be considered workers for the purpose of forming unions.
When FedEx drivers received the letter in May, many of them didn’t know what it meant, according to Norita Taylor, spokeswoman for the Owner-Operator Independent Drivers Association, a nationwide group based in Missouri.
Since then, though, Taylor said she hasn’t heard much from the organization’s members about the issue. She said some may have decided against changing their status and quit driving for FedEx, but most have probably agreed to the company’s terms.
Teixeira said he’s glad to have the chance to run his business, which he named M.A.T. Transports Inc., and proud that he’s been able to hire four other drivers. Right now he drives a truck himself while also supervising his employees, but he hopes to hire another driver.
“It’s, I guess, anyone’s dream to try to grow and try to become more successful,” Teixeira said.
But he says that the hardship and uncertainty of running a startup operation isn’t for everyone.
“Like anything else, when you start it, it can be challenging,” he said.
Not For The Risk-Averse
Teixeira said he found forming a corporation neither terribly expensive nor terribly difficult. According to the Secretary of the Commonwealth’s website, registering a corporation in Massachusetts costs a minimum of $275, and corporate owners must spend at least $100 to file an annual report each year.
The use of independent contractors as drivers is one of the major differences between the FedEx model and that of its major rival, UPS. UPS employs its drivers directly, and they are generally unionized.
Despite the new changes to FedEx’s rules on drivers, unions still argue that classifying them as independent contractors amounts to cheating people who are actually employees.
In a statement, Ken Hall, director of the Teamsters Package Division, said that the drivers “are still treated like employees in every way that counts and they should be entitled to the protections of federal and state labor and employment laws.”
But Teixeira said that, for him, the company’s way of doing business hasn’t been a problem.
“I think it’s more like an opportunity,” he said.
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