Amazon Seemingly Builds Its Driver Service Partner Program Off the Backs of Small Logistics Companies
Today, the Tampa Bay Times reported that Amazon is cutting ties with a number of small logistics companies around the country, setting up a wave of driver layoffs around the Tampa Bay area and beyond.
Amazon started its own Delivery Service Partner program in June 2018 by encouraging entrepreneurs to lease vans, hire drivers and become delivery partners with the company with the promise of low startup costs and the dream of owning their own business. Since then, more than 800 companies have signed up nationwide, employing about 75,000 drivers.
However, Amazon is now cutting ties with a different set of logistics companies – companies that Amazon contracted with well before it began developing its own Delivery Service Partner program less than two years ago.
According to the article, Amazon terminated its contracts with at least two small logistics companies that operated out of its St. Petersburg and Tampa delivery centers. In total this will result in nearly 200 local employees – nearly all delivery drivers – being laid off. While on its face this seems like bad news for drivers, the statement released by Amazon is actually much more interesting when you read between the lines:
“Prior to launching the Delivery Service Partner program to empower entrepreneurs to build their businesses with Amazon, we contracted with a number of small logistics companies," a company spokesperson said in an email to the Tampa Bay Times.
“Some of these companies have not met our bar for safety, performance or working conditions, and we’re in the process of exiting them from the program,” the company’s statement said. “We are planning for there to be zero or very little net job loss in these communities” as a result of the contracts being terminated "because nearly all impacted employees of these companies will have an opportunity to move into other delivery driver roles with Amazon partners.”
In response to Amazon’s statement one can’t help but wonder, “If the plan is for there to be zero or very little net job loss because nearly all impacted employees [i.e. drivers] will have an opportunity to move into other delivery roles with Amazon partners, doesn’t the reason for ending its contracts with the original logistics companies – that those companies didn’t meet Amazon’s bar for safety or performance – seem pretextual?”
It’s worth noting that because the companies in the Delivery Service Partner program tend to be small, Amazon has much more leverage in negotiating contracts than it would if it were dealing with major delivery services such as FedEx, UPS, or USPS. This can then mean lower wages for drivers who work for smaller logistics companies compared to those who work for larger carriers. Further, Amazon’s termination wave isn’t limited to the Tampa Bay area or Florida, it’s also affecting small logistics carriers throughout the country.
Amazon’s actions simply don’t seem to pass the smell test. Rather, it appears that Amazon is building its Delivery Service Partner program off the backs of small logistics companies it previously partnered with. Is Amazon’s decision to stop doing business with small logistics companies that it contracted with prior to launching its own Delivery Service Partner program and subsequently hiring the same drivers who worked for those companies inviting potential class action litigation? Time will tell....
Rick Duarte is the owner of The Duarte Firm, P.A., where he focuses his practice on business law. He received his law degree from the Emory University School of Law and has been named a “Rising Star” in Business Litigation by Florida Super Lawyers for 2016 – 2020. Rick also serves as general counsel to emerging and medium-sized businesses, guiding clients through corporate governance, risk management issues, and strategic decisions where business and law intersect.