Recently the New York Times reviewed The Big Squeeze: Tough Times for the American Worker, by Steven Greenhouse, a reporter for the newspaper. The book, published by Knopf last week, examines how companies like Fed Ex and Walmart bleed workers to reap hundreds of millions of dollars in savings, and points to Patagonia and Costco as models that inspire employees to bring all of their creativity and passion to work every day.
I once held FedEx in pretty high regard. But after reading how FedEx Ground fired a driver who requested a leave of absence for treatment of her breast cancer, I will never again feel the same about using the company’s services. And I might never again shop in Circuit City, fly Northwest Airlines, shop at A&P, get my hair cut at SmartStyle, or have lunch at Taco Bell.
But we’ll start with a short excerpt from the book about Walmart, a company I’ve been working pretty hard to have faith in.
“In his job at a Walmart in Texas, Mike Michell was responsible for catching shoplifters, and he was good at it, too, catching 180 in one two-year period. But one afternoon things went wildly awry when he chased a thief — a woman using stolen checks — into the parking lot. She jumped into her car, and her accomplice gunned the accelerator, slamming the car into Michell and sending him to the hospital with a broken kneecap, a badly torn shoulder, and two herniated disks. Michell was so devoted to Walmart that he somehow returned to work the next day, but a few weeks later he told his boss that he needed surgery on his knee. He was fired soon afterward, apparently as part of a strategy to dismiss workers whose injuries run up Walmart’s workers’ comp bills.”
We all keep hearing that business is tough, competition is brutal and that developing countries with low wages are eating our lunch. But if that’s the case, why have corporate profits soared, climbing on average 13 percent a year for the last six years, while wages have remained flat?
Greenhouse writes that,
“Employee productivity has outpaced wages, rising 15 percent from 2001 through 2007. Corporate profits have climbed to their highest share of national income in sixty-four years, while the share going to wages has sunk to its lowest level since 1929. ‘This is the most pronounced several years of labor’s share declining,’ said Lawrence Katz, an economics professor at Harvard. ‘For as long as we’ve had a modern economy, this is the worst we’ve seen it.’ Very simply, corporations, along with their CEOs, are seizing a bigger piece of the nation’s economic pie for themselves, leaving the nation’s workers and their families diminished.”
Well, we’ve heard that before. But what we haven’t heard are the stories of how the headlines play out in people’s lives. What it feels like to be laid off by Northwest Airlines and receive a booklet titled “101 Ways to Save Money,” that suggests, “Don’t be shy about pulling something you like out of the trash.”
Please forgive the long excerpt from the book below – but you absolutely – positively – must read it! It tells the story of how Jean Capobianco, a two time survivor of breast cancer and former independent contractor to FedEx Ground, was abused and cheated so that your packages cost less money and FedEx makes bigger profits.
FedEx responded with a letter to the Times, in which it offered up an utterly hollow homily: “There is no more important corporate value at FedEx Ground than how we treat people…” The letter ignored the allegation that depriving drivers of social security and payments for their trucks saves FedEx roughly $400 million a year.
This excerpt is from The Big Squeeze: Tough Times for the American Worker, by Steven Greenhouse (Knopf 2008):
When Jean Capobianco was diagnosed for the second time with breast cancer, her doctors ordered a mastectomy. She first contracted the disease three years earlier and suffered through seven months of chemotherapy. After her cancer came back, her husband walked out on her. “He told me he wasn’t sexually attracted to me anymore,” she said.
For more than a decade, Jean and her husband had been a truck-driving team, driving hazardous waste. Now, with husband and truck gone, her career as a long-haul driver was gone as well.
After she recovered, Jean started looking for work. She spotted a help-wanted ad from Roadway Package Systems, which said it was looking for independent contractors to deliver packages.
“I needed a job,” said Jean. “They tell you, ‘You’ll make all this money working for yourself.’ ”
She soon discovered that her new employer had embraced a controversial strategy to squeeze down costs by millions of dollars each year: it insisted that Jean and the other drivers were independent contractors, not employees. The I.R.S., New York and many other states are investigating this strategy, convinced that many companies use it to cheat their workers and cheat on taxes.
Jean arrived at the Roadway terminal in Brockton, Mass., at 6 each morning and spent the next 90 minutes loading 100 to 140 packages into her truck. She usually left the terminal around 7:30 a.m. and returned after 6 p.m.
Jean had to leave her job for two years when she suffered a severe back injury while lifting a package. Before she could return to work, FedEx Ground, which had acquired Roadway, required her to purchase a truck. The list price was $37,800, with Jean having to make 60 monthly installments of $781.12 and a final, one-time payment of $8,000.
In Jean’s view, it was ludicrous for Roadway and FedEx to call the drivers independent contractors.
“We’re told what to do, when to do it, how to do it, when to take time off,” Jean said. “You have to wear their uniform. You can’t wear your hair certain ways. You have to deliver every single thing they put on the truck.”
Jean called it “a great deal for FedEx. They don’t have to pay for trucks, for the insurance, for fuel, for maintenance, for tires,” she said. “We have to pay for all those things. And they don’t have to pay our Social Security.”
By some estimates, this arrangement saves FedEx $400 million a year, giving it a significant cost advantage over U.P.S., which treats its drivers as regular employees. Moreover, FedEx Ground has sought to rebuff a Teamster organizing drive by arguing that its 15,000 drivers have no right to unionize because they are independent contractors.
“These drivers are more like business people,” said Perry Colosimo, a FedEx Ground spokesman. “They can set their own hours. They can buy routes. They can develop their business.”
In 30 lawsuits, FedEx Ground drivers have argued that they are employees, not independent contractors, and that the company should therefore pay for their trucks, insurance, repairs, gas and tires. In one lawsuit, a California judge ruled that FedEx Ground was engaged in an elaborate ruse in which FedEx “has close to absolute control” over the drivers. Last December, FedEx acknowledged another setback: the I.R.S. ordered it to pay $319 million in taxes and penalties for 2002 for misclassifying employees as independent contractors. FedEx could face similar I.R.S. penalties for subsequent years. FedEx said it would appeal.
To attract drivers, FedEx Ground often runs ads claiming that its drivers earn $60,000 to $80,000 a year. Many drivers say those ads are deceiving. Gross income can exceed $60,000, but Jean, echoing many drivers, said she had to pay nearly $800 a month for her truck, $125 a week for gas, $55 a week for business equipment, $4,000 a year for insurance policies, plus outlays for tires, maintenance and repairs. Some years, Jean calculated, her net pay was just $32,000, amounting to $10.25 an hour.
Many drivers find it hard to walk away because they have invested so much in their trucks. If they leave, they might still be stuck with years of monthly payments and the final payment of $8,000.
One morning in August 2004, Jean doubled over in pain. Three days later, her doctor informed her she had ovarian cancer.
“The doctor told me to stop working immediately,” Jean said. She not only finished her route that Friday but worked the following Monday and Tuesday as she struggled to find someone to cover her route. Her terminal’s two replacement drivers demanded unrealistic amounts, she said. “They knew they had me over a barrel.”
On Aug. 21, 2004, surgeons removed a large, malignant tumor and did a hysterectomy. The next week the doctors told her she had Stage 4 cancer that had spread to her lungs. She would need chemotherapy through late December.
Jean had twice beaten breast cancer, and she was intent on beating this, too. She fully expected to return to her job in January, and called FedEx Ground’s headquarters to request a leave of absence. Weeks later, a letter arrived saying she was terminated.
“I was crazy with anger,” she said.
Fired and with no income, Jean stopped making payments on her truck. She had already paid more than $40,000 on it, but now she was powerless to prevent it from being repossessed.
Stories like this are shocking. I sat in painful disbelief the first time through. This is a book you simply must read. When you do, please challenge the companies mentioned for a response. Let them know that you won’t support them. That you’ll tell your friends about them. And know that when companies like FedEx cheat their “independent contractors,” ultimately they cheat themselves, for they’ll never win the high-end, human capabilities (like initiative and innovation) that fuel enduring success.