FedEx is headed to court and they may win their case. However, Ronn Torossian believes that, in the court of public opinion, a win might be worse than a loss.
When it comes down to it, most people don’t quibble about their shipping preference. For the average consumer, the difference between FedEx and UPS is fairly minimal. From a public relations perspective, a win is not giving your customers a reason to CHOOSE the other guy – this may be about to change.
No matter how long or how often they work, FedEx drivers are not legally employees. They are independent contractors. Regardless of drivers’ employment status, the company maintains strict appearance, timeliness, and work standards from its drivers. In addition, the company reportedly deducts the cost of uniforms, truck washings, and log scanners from the drivers’ paychecks.
While these standards and practices may seem like those of an employer, FedEx considers their drivers to be independent contractors. The company doesn’t pay overtime to its drivers nor does it contribute to their Social Security benefits. These stipulations motivated a cadre of former drivers to sue FedEx Ground for back pay, including overtime and paycheck deductions.
Meanwhile, FedEx is defending the business model, claiming that it creates a healthy motivation for contractors to do their best. The courts aren’t buying FedEx’s rationale and recent rulings have determined that its drivers are defacto employees. Undeterred by these recent adverse rulings by the court, FedEx continues to disagree in the courtroom. FedEx has won very similar cases in the past, and a win in this case could save FedEx a tremendous amount of money in back pay as well as in the cost of current and future benefits for its drivers.
Ronn Torossian believes that each win for FedEx also comes with a cost that cannot be recovered – damage to its brand in the eyes of public opinion. According to Torossian, each time public consumers hear about these challenges and cases, they learn about the glaring difference between FedEx and UPS – while FedEx drivers are in and out of court fighting for employee status – UPS drivers are not only employees, they have a union.
On the surface this might seem like a selling point for FedEx, considering their argument is that their business model directly benefits the customer – yet, the company is somewhat reticent to bring this point of comparison to the forefront in marketing. As Ronn Torossian observes, “They’ll talk speed and they’ll talk quality . . . but, they rarely bring up motivated workers.”
Smart, because its a losing argument in the court of public opinion. Why? Because it rings so hollow. The company might save a lot on employment costs, taxes, and other benefits, however, it doesn’t appear to be passing those savings on to their customers. In turn, FedEx’s benefit from its argument is a net zero where PR is concerned. Another argument that FedEx puts forth in favor of contract employees is that the business can grow or shrink much easier – the company is less restricted without the typical employer-employee ties, therefore, they can more easily sever relationships. Plus, adding contractors is much more cost effective than bringing in new employees. Again, these factors solely and squarely benefit the business – extending next to nothing for the consumer.
Taken together, FedEx comes off as a company looking to make a profit, which is typically not a bad thing. Nonetheless, the company looks like they are doing it at the expense of workers without any tangible benefits to its customers. In Ronn Torossian’s opinion, that’s a PR loser every time.