The company that FedEx once contracted with to deliver packages at the California-Oregon border is suing the cargo shipper, claiming it systematically violated a US anti-racketeering law, according to Reuters.
PYNQ Logistics Services filed a lawsuit in California federal court on November 14, which was not previously disclosed. The accuser seeks a determination that its relationship with FedEx Ground is that of an employee, not a contractor. PYNQ has also reserved the right to file a class action lawsuit.
This is allegedly the first time that former FedEx contractor Ground has sued the global delivery giant under the US Racketeer Influenced and Corrupt Organisations Act (RICO), according to Jeffrey Possinger, an attorney representing the plaintiff.
Frank Botta, a former in-house lawyer for the company that FedEx bought and renamed as its Ground unit, stated that the move was made to avoid arbitration.
“This is a twist of an attack on the independent contractor relationship. They set this up as fraud claims to avoid arbitration.”
FedEx stated it was aware of the allegations and would “vigorously defend the lawsuit.” As of late Thursday, FedEx had not filed a response to the lawsuit.
The biggest concern is that this case might morph into a class action case. If that happens, it’s going to be a long, hard-fought battle.
PYNQ alleges that FedEx violates laws governing contractors by exercising the same level of control over these service providers as it does over its employees. The use of contractors allows Ground to shift personnel and other costs to these service providers.
It also helps FedEx control labour costs by thwarting union organising efforts, which are more complicated in many smaller companies than in a single large company.
PYNQ spent $1.13 million in 2021 to buy two FedEx Ground delivery zones with routes serving McKinleyville in Northern California and Crescent City. In May, FedEx sent termination letters to both service areas and sold one of them without its consent or compensation.
According to the complaint, FedEx utilised new systems that evaluate delivery services and rate areas to support its actions. PYNQ claimed the company deliberately withheld information that could have been critical to its decision to become a contractor.
The suit alleged FedEx also prevented PYNQ from changing its business to improve profitability or recouping its investment by selling delivery areas.
PYNQ alleged that many of the company’s operating policies and procedures were not disclosed, were unfairly applied, or could have been changed without notice, and that they were elements of a systemic pattern of deceptive practices that rose to the level of racketeering.
