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FedEx: Safety is the top priority for FedEx, both within our operating companies and across our network of vendors and service providers. We maintain a competitive safety record and are committed to complying with safety standards that meet or exceed DOT regulations. The tragic accident you referenced involved a former third-party transportation carrier for FedEx SmartPost, a subsidiary of FedEx Ground. As a freight forwarder, FedEx SmartPost contracts exclusively with third-party vendors for transportation services. Those vendors agree to maintain their own DOT operating authority and as a result are responsible for any claims related to their operations.
With respect to your question about litigation involving FedEx Ground’s business model… FedEx Ground has always contracted exclusively with independent businesses for transportation services since the company’s founding in 1985. In contrast to the situation above, these companies operate under FedEx Ground’s DOT operating authority and as a result FedEx Ground is responsible for any claims related to its operations. These businesses were created by energetic entrepreneurs who are hiring employees, purchasing equipment and paying taxes in every state in the U.S. They are incorporated under state law and registered and in “good standing” with the states in which they operate.
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Over the years, our business model has been upheld by more than 100 state and federal rulings, including those by the IRS and the U.S. Court of Appeals for the D.C. Circuit, which ruled that FedEx Ground service providers are properly classified as a matter of law. We’re confident that current legal challenges to our model will lead the courts to reach the same conclusion. Small businesses are the foundation and growth engine of the U.S. economy, and we are proud of our long-standing relationship with these service providers – each of which must comply with all applicable federal and state laws. We remain committed to maintaining a business model that has been proven successful for our customers, service providers, and shareowners.
Additional background: FedEx Ground contracts with more than 700 service providers in California. Those service providers averaged nearly $580,000 in revenue last year with the top earner reporting $4.6 million in revenue. Nearly 100 of these California-based independent businesses earned annual revenue of $1 million or more in 2013.
NBC Bay Area: When FedEx SmartPost contracts with third-party vendors, does the company background check third party venders to make sure that they have current DOT operating permits and proper insurance?
FedEx: FedEx SmartPost requires all third-party vendors to maintain the proper DOT operating authority, insurances and safety requirements. A third-party software vendor is used to monitor the DOT website for operating authority, insurance and safety compliance.
NBC Bay Area: During our research, we noted that VRS Carriers LLC contracts with Fedex Ground. According to the FMCSA, VRS does not have USDOT operating authority. The agency’s system shows the carrier’s insurance has lapsed. Can you please comment?
FedEx: Service providers under contract to provide transportation services to FedEx Ground operate under FedEx Ground's DOT operating authority.
NBC Bay Area: To clarify, is VRS Carriers LLC operating under Fedex Ground’s DOT operating authority?
FedEx: VRS Carriers LLC formerly provided transportation services to FedEx SmartPost until June of this year, when it was reported to FedEx SmartPost that the carrier lost its operating authority due to an insurance lapse. No freight has been tendered to VRS Carriers by FedEx SmartPost since the day its operating authority was revoked.