More than 3,200 drivers who deliver Amazon packages to homes and businesses across the country each day will be laid off by the end of April as the e-commerce giant continues a significant shift from large delivery contractors to smaller ones that are cheaper and easier to control.
In the past several months, the online retailer has informed at least eight delivery firms that it would be severing contracts with them. In turn, those contractors told state workforce regulators that they would be forced to lay off at least 3,242 employees, records show.
That comes in addition to the layoffs of more than 2,000 drivers from three other terminated delivery firms reported by BuzzFeed News and ProPublica in October. All three of those firms had been involved in accidents resulting in fatalities that were previously reported in investigations by the news organizations.
“Sometimes the companies we contract with to deliver packages do not meet our bar for safety, performance or working conditions,” Amazon said in a statement. “When that happens we have a responsibility to terminate those relationships and work to find new partners. We care a lot about the communities where we operate and work hard to ensure there is zero or very little net job loss in these communities.”
Although Amazon offers laid-off drivers the chance to apply for new jobs with its other delivery contractors, the company’s director of transportation compliance, Carey Richardson, recently acknowledged under oath that it’s rare for more than 60% of those individuals to end up at one of those firms. That’s a particular issue at this time of year, when the holiday rush is over and many delivery contractors say they are not hiring.
“There are no jobs for these drivers to transition to,” said the owner of one Amazon delivery firm that has not lost its contract and who requested anonymity for fear of reprisal. “They have nowhere to go.”
To achieve its promise of next-day delivery, Amazon relies on a homegrown network of independent companies that hire their own drivers, rather than employ its own workforce directly. Those contractors, recognizable by their ubiquitous cargo vans that roam the streets of almost every community in the country, delivered more than half of the record number of packages Amazon shipped to customers this past holiday season.
The use of contractors also creates a layer of legal separation that helps Amazon deny liability when things go amiss. Investigations by BuzzFeed News and ProPublica last year found that Amazon contractors have been involved in dozens of serious crashes, including at least 10 that were fatal. Many of the online retailer’s delivery firms have been investigated by the Labor Department following allegations that workers were underpaid and denied proper lunch or bathroom breaks.
Using contractors also makes it easy for the online retailer to unilaterally drop firms — many of whom have no other source of revenue and are forced to go out of business — at its whim.
Most recently, Transportation Brokerage Specialists, based in Costa Mesa, California, lost its contract with Amazon and said it would be shutting down its operations in California, Arizona, Washington, and Oregon. As a result, the firm will be forced to initiate a “mass layoff of approximately 907 employees,” the company wrote in a letter to regulators last week.
Amazon has also severed contracts with other contractors, including Bear Down Logistics, Express Parcel Service, Delivery Force, Urban Mobility Now, RailCrew Xpress, Dash Delivery, and 1-800-Courier in recent months, government records show, leading to layoffs in at least 18 states, including California, Texas, Pennsylvania, Georgia, Florida, Ohio, Virginia, North Carolina, Washington, Wisconsin, Massachusetts, Connecticut, Kentucky, Alabama, Michigan, Arizona, Minnesota, and Oregon.
One RailCrew Xpress driver in Alabama was recently told she’d be out of work on April 12. She said she wants to get a job with another Amazon delivery contractor but is far from confident. “I have to apply and hope for the best,” said the woman, who requested anonymity for fear that speaking out would prevent her from getting hired.
After being told he would be laid off because his employer, Delivery Force, was getting terminated by Amazon, one driver got a job offer from a different delivery contractor. But that job paid less, $15 instead of $17 an hour, he said. “It just can’t work,” said the man, who requested anonymity because he is still working for Delivery Force. “It’s so sad,” he added. “We had all these plans for our team … We had no clue until we got the letter.”
Amazon launched its delivery network as an alternative to UPS, FedEx, and the US Postal Service in 2014. Originally, it brought in established logistics firms, some of which it contracted to operate in multiple locations and run hundreds or even thousands of routes at a time. But since mid-2018, Amazon has been aggressively shifting its delivery model toward smaller contractors that work from a single location and manage no more than a few dozen routes.
Because of their size, those smaller companies have less negotiating leverage with Amazon, which in some cases pays them as much as 5% less than it paid its so-called legacy or 1.0 carriers for the same work, court records show. While Amazon pays legacy carriers a monthly stipend to cover the cost of dispatchers, for example, there is no such payment for the newer firms.
In addition, while legacy contractors are free to choose their own vendors and purchase or lease their own vehicles, Amazon requires its newer carriers, known internally as 2.0, to lease blue vans branded with the Amazon smile logo and to obtain insurance and manage payroll through providers that it selects, giving the $900 billion company far more control over their daily operations.
Amazon does not publish a list of all its delivery contractors and in October refused a written request from three US senators to do so, although it did say it had more than 800 firms under contract at the time. As of late last month, there were roughly 30 legacy contractors still delivering Amazon packages, according to court testimony.
Meanwhile, Amazon continues signing up hundreds of new, small, 2.0 contractors around the country. In its statement, the online retailer said that “in the past six months, more than 300 new Delivery Service Partners have launched their businesses with Amazon, creating job opportunities for nearly 15,000 drivers.”
Drivers at some of the 2.0 firms complain of some of the same workplace issues as at legacy contractors, including being forced to drive poorly maintained vans, not receiving overtime pay, and being denied proper lunch or bathroom breaks. At least one 2.0 firm, Amazing Courier Express Services, based outside San Diego, has been subject to an employment suit, court records show. That suit is still pending.
Last summer, Amazon managers in Seattle reviewed the company’s remaining legacy contractors, ultimately creating a list of 15 firms marked for termination. Amazon manager Micah McCabe, whose job is to “own the exit process” of delivery contractors, said in court testimony that those 15 firms were singled out solely because they had been named in employment lawsuits by drivers.
But some delivery firm owners claim Amazon’s termination decisions are capricious and inconsistent. A review of court records reveals other legacy firms that have delivered for Amazon for years have been named in multiple employment lawsuits yet do not appear to have been terminated. Courier Distribution Systems, for example, has been sued by its drivers at least 13 times, most recently in November. Yet the Georgia-based firm continues to post "help wanted" ads for Amazon drivers, and in some cases offers a wage below the $15 minimum hourly rate Amazon has said it requires its delivery contractors to pay.
A different legacy contractor, Bear Down Logistics, has been the subject of just one employment suit, court records show. But last summer, 75 of its drivers in Wisconsin — frustrated by low pay, inadequate health insurance, and other issues — filed for a labor election that would allow them to be represented by a trade union. Earlier this month, Bloomberg News first reported that Bear Down Logistics had lost its contract with Amazon and as many as 400 drivers would be laid off in April.
When Amazon terminates a delivery firm, it typically offers payment in exchange for signing a non-disclosure agreement. None of the eight delivery firms that have been terminated responded to requests for comment from BuzzFeed News.
One delivery firm on the termination list, Scoobeez, refused Amazon’s $1 million offer and is currently fighting the online retailer’s efforts to shut it down in court. Scoobeez, based outside of Los Angeles, employs almost 900 drivers in three states and gets essentially all of its income from Amazon; in December 2018 it operated more than 13,000 routes and had $5.1 million in revenue, according to court records.
The delivery firm, which has been working for Amazon since 2015, refused to accept the terms of the 2.0 contract because it “would have taken a 5 percent haircut” on what it earned, according to an email written by Eric Swanson, director of Amazon’s last mile program.
Scoobeez, which has been sued multiple times by workers alleging underpayment and also was accused by its creditors of possible criminal mismanagement, filed for bankruptcy protection last April. Amazon continued giving Scoobeez business after the filing, but in October informed the company that its contract would be terminated.
Amazon has been unable to cut off Scoobeez because of bankruptcy court protections but contends it shouldn’t be forced to do business with a company it no longer wants delivering its packages, citing concerns that could hurt its reputation.
“If a driver was then to contact media, then Amazon, again, could be called out as the bad guy,” Amazon’s compliance manager Richardson testified. Added McCabe: “I would point to a BuzzFeed article that came out several months ago."
Scoobeez was featured prominently in that article. At least three other firms mentioned in that report have also since been terminated by Amazon since publication.