On the Clock is Motherboard’s reporting on the organized labor movement, gig work, automation, and the future of work.
Last June, during Amazon’s biggest sales events of the year, Andy, who owned one of many small businesses that deliver packages for Amazon across the country, had to increase his number of daily delivery routes from roughly 25 to roughly 50 per day. For months, Andy, a delivery service partner for Amazon in Milford, Massachusetts, struggled to hire drivers with the $33-per-hour per driver reimbursement offered by Amazon. The $33 had to account for each driver’s wages, worker’s comp, health insurance, and other benefits.
He posted ads on Indeed, Craigslist, and Facebook, but his drivers quit en masse; the $23 an hour that he paid from funds provided by Amazon was not enough to keep drivers around. (As a point of comparison, unionized UPS drivers have a straightforward path to wage increases; they can make upwards of $40 an hour.) In October, Andy received a letter saying he could lose his contract because he hadn’t met his route quotas during Prime Week.
Amazon delivery service partners like Andy’s, the network of small businesses across the United States that make the company’s quick deliveries possible, are struggling to stay in business because of a labor shortage that has left them unable to staff up and meet demand. Owners of these small businesses have told Motherboard that rather than providing them with help, Amazon demanded they run more delivery routes than they had drivers. If they didn’t, Amazon could cut their contract, leaving them scrambling to pay off debts they collected running the business.
“It was as if you were drowning, and someone’s looking at you and saying, ‘Do you need any help?’ And you’re like, ‘Yes, I am drowning.’ But Amazon never provides any answers. They go silent,” said Andy, who had his contract cut in March. Motherboard granted Andy anonymity because he is still in the process of having his debts assessed.
Andy and other Amazon delivery service partners in this story asked to use pseudonyms because they feared retaliation from Amazon.
In March, Andy received a call from Amazon’s “network health” division; the company was terminating his contract for failing to run enough routes, Motherboard confirmed. “It was a five, 10-minute call,” he said. “They sent me an option to get $10,000 if I signed a [nondisclosure agreement]. It’s not worth it to me to keep quiet for my experience.” Motherboard confirmed the details of the separation agreement.
“During Peak 2021, your company delivered less than 80 percent of your Peak 2021 plan record,” a separate email from Amazon compliance reviewed by Motherboard states. “Amazon has elected to terminate the [agreement] with your company…for not meeting Service Level Standards by failing to scale for Peak 2021.”
Motherboard spoke to two other Amazon delivery company owners who said Amazon terminated their contracts this year for failure to ramp-up to Amazon’s “route targets.” When Amazon terminates its delivery companies, many owners go into hundred of thousands of dollars in debt, as Motherboard has previously reported. Andy has not yet received a final bill for what he owes, but he owes repairs on 45 vans that he leased, which typically run at $5,000 per van, which means he could owe more than $200,000.
“From what I can ascertain, Amazon decides who they want to cut and then uses ‘reliability’ as the justification.”
Meanwhile, Amazon’s delivery contractors are still struggling with staffing. Last year, Amazon rolled out a new rule, known as “capacity reliability” that allows Amazon to lower the volume of packages allocated to a delivery contractor or terminate them if their reliability score is “consistently below” the target, according to internal documents. (The score is calculated as the amount of routes completed over the amount of routes Amazon expected a contractor to complete.) Recently, Amazon delivery companies have been written up for failing to meet 80 to 85 percent of their route commitments for four consecutive weeks.
Amazon is poised to become the largest delivery service provider in the United States in 2022, surpassing UPS and FedEx. Rather than hire a workforce to deliver its own packages directly, the company contracts the work out to roughly 1,700 small businesses, who deliver packages solely for Amazon as part of its delivery service partner program and employ the more than 100,000 drivers who deliver Amazon packages to customer’s homes in Amazon-branded vans. The arrangement allows Amazon to offload liability and risk for its workforce and operations onto smaller businesses.
Motherboard asked Amazon how it supported its delivery contractors during the labor shortage, and the company highlighted investments in wage increases. “Last year alone, we invested hundreds of millions of dollars to help [delivery service partners] around the country increase driver wages and offer financial incentives to attract drivers to their small businesses,” Maria Boschetti, an Amazon spokesperson said.
Boschetti noted that a number of factors go into Amazon’s determination to end a contract with a delivery service partner, “including performance, meeting our supplier code of conduct, legal compliance, and financial health.”
“When we find that a DSP is not meeting the bar, we provide additional coaching and support to help them improve,” Boschetti said. “There are some rare cases when a DSP fails to improve—even with that support—and we have to end our relationship with them for the good of our customers and other partners.”
Though delivery service partners are legally independent from Amazon, the e-commerce giant controls many aspects of their business. Contractors receive all of their income from Amazon, including a set daily rate from Amazon for each delivery route that varies regionally. Delivery service partners technically choose what to pay drivers, but they are very limited by both minimums set by Amazon (typically a starting wage of $18 an hour), and the amount that Amazon will pay the delivery service partner per route. In Milford, Amazon required Andy to pay drivers at least $19.50 an hour, but he ended up offering $23 an hour to attract more drivers, Motherboard confirmed. Amazon paid Andy $33 an hour per route, meaning he only had $33 to allocate to a driver’s wages, workers comp, and health insurance. Andy can’t offer more competitive pay without Amazon paying him more per route or risking a loss.
The company also maintains the right to dictate many aspects of the business model, from route assignments to delivery routes to hiring. Amazon typically notifies companies of their route assignments only a few days in advance and automatically accepts routes on behalf of delivery companies. In the lead up to peak season and Prime Day, Amazon gives companies a six-week notice period about the number of routes they’ll need to ramp up to during that time, Amazon told Motherboard. But delivery companies have told Motherboard Amazon often adds or removes routes with little warning. Amazon’s delivery companies do not have the ability to decline routes without being fined.
Under Amazon’s new “capacity reliability” metric, if companies hit less than 80 percent of their route targets for four weeks, Amazon can put companies into “breach of contract,” according to an internal video, which can lead to terminations. Boschetti, the Amazon spokesperson, told Motherboard that there is no maximum for the number of delivery routes Amazon can assign a delivery contractor, though added that they worked with contractors to ensure that route assignments are “manageable.”
“From what I can ascertain, Amazon decides who they want to cut and then uses ‘reliability’ as the justification,” an Amazon delivery company owner near Seattle told Motherboard.
Many employers large and small have struggled to hire over the past year, as low-wage workers gained unprecedented leverage to quit undesirable, low-wage jobs in a hot labor market fueled by government stimulus, unemployment benefits and pent up consumer demand. In November 2021, a record 4.5 million workers in the United States quit their jobs. In December, there were nearly two job openings for every unemployed person in America, according to Bureau of Labor Statistics data. Large employers such Amazon struggled with hiring too; the company raised its average starting wage to $18 an hour for warehouse workers and offered sign-on bonuses of up to $3,000. (These raises also extended to Amazon’s contracted delivery drivers.)
But the small businesses that deliver Amazon packages say that Amazon hasn’t increased their route reimbursement to raise wages enough to compel people to sign up to work as Amazon delivery drivers. The job is dangerous and grueling. Workers face hostile customers, high rates of serious injury, and have famously had to pee in bottles because they don’t have enough time for bathroom breaks. Amazon delivery service partners say the labor shortage has become another opportunity for Amazon to offload liability for its workforce and financial risk onto its small delivery businesses. “This is a ploy to pass liability off onto other companies,” said Andy, who lost his contract in March.
Rob, another Amazon delivery service partner in Renton, Washington, also had his contract cut in March after two years in the program for failing to keep up with route commitments that he said Amazon changed two weeks before peak season. Motherboard granted Rob anonymity because he is considering legal action. In November, he said Amazon asked him to ramp up from 20 to 32 routes, but two weeks out from peak, it changed his commitment to 55 routes. “That’s 40 drivers that I had to hire and get through background checks, training, and drug testing [in two weeks],” he said, noting that he was unable to hit these targets.
A spokesperson for Amazon denied that route commitments were changed two weeks before peak season. “This is inaccurate,” said Boschetti, the Amazon spokesperson. “We let our [delivery service partners] know about their routes and ramp schedule more than two months before the start of the holiday shopping season.”
In March, Rob had his contract cut and had to lay off 68 employees.
“For me, that is likely bankruptcy if I can’t sell my house and cover it,” he said. “It means a drastic change for my family for sure in the coming months, but we’ll find a way. Putting that on my drivers though was even worse. I’ve spent years making sure my drivers were as happy as I could make them despite how grueling the work can be.”
Mike and Anita, a Black couple who have owned an Amazon delivery company in the suburbs of Dallas, Texas since the program launched in 2018, also lost their contract to deliver Amazon packages this spring for “failure to ramp.”
“What I really want is for Amazon to stop overreaching their power and putting people in a worse situation than when they started. Especially when they target the program toward minorities and vets.”
The couple was one of the earliest Amazon delivery partners when Amazon debuted its delivery service partner program—marketing the opportunity in particular to veterans and minorities as a chance to earn up to an annual profit of between $75,000 and $300,000.
In recent years, Amazon has frequently asked Mike to sing the program’s praises on recruiting panels and social hours for prospective Amazon delivery service partners and to be a resource at training for new partners on Zoom. They’ve flown him out to Las Vegas and Seattle for other events. Motherboard reviewed multiple requests Amazon sent to Mike to speak at these events. They also approached him to pilot new programs such as returning Whole Foods packages back to the warehouse.
But on April 9, after four years delivering packages for Amazon, the couple was forced to shut down and lay off 53 employees. “It was one of the worst days ever,” Mike told Motherboard. “I’ve had folks that have been working with me for years. [Our 53 employees] were shocked. I said ‘listen,’ just like talking to kids in a divorce ‘it’s not you guys, you didn’t do anything wrong.’”
As recently as February, Amazon had asked Mike to sit on a guest speaker panel to “share …experiences with new Owners going through the onboarding process,” Motherboard confirmed. “I will say that it’s outrageous to me that four weeks before they cut us they said ‘hey, can you sit on a panel for our program?”’ and next month, it’s ‘you can’t cut the mustard.’”
The couple also had faced severe hiring challenges. Amazon had repeatedly sent them “breach of contract” letters for failing to scale “during peak times” in 2020 and 2021, according to emails viewed by Motherboard. In 2020 Amazon had transferred the couple from a warehouse in a low-income Dallas suburb where the median household income was $63,000 a year to an affluent town off a highway with tolls where the median household income is $129,000 a year. The transfer to the wealthier town and the added commuting cost of tolls made it difficult to recruit new drivers even with ads taken out in both communities, the couple said. “We lost 60 percent percent of our workforce moving up here,” Mike said. “It was too far to drive for $15 an hour.”
In recent months, the couple says Amazon has also faced hiring challenges in its warehouse and bussed in warehouse workers from other communities, but that transportation offering didn’t extend to delivery drivers. “They were fighting the same thing as us,” Mike said.
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The couple, who has two young children, says they expect to have roughly $100,000 of debt from repairs on damages to 40 Amazon vans, worker’s compensation claims, and paying out vacation time to their workers, and might have to file for bankruptcy.
“What I really want is for Amazon to stop overreaching their power and putting people in a worse situation than when they started,” said Anita, “Especially when they target the program toward minorities and vets.”