Another lawsuit involving a former Amazon Delivery Service Partner (DSP) against the e-commerce company and its logistics arm calls into question just how much control Amazon exercises over its third-party contractors’ businesses.
The lawsuit, filed last week in Michigan district court by Shazor Logistics, seeks $150,000 in damages, in addition to lost profits, earnings and attorney fees.
The complaint is the latest to challenge the legality of Amazon’s relationship with the third-party delivery companies it uses to handle package delivery, given these DSPs are not considered employees or franchisees of Amazon.
In Shazor’s case, it alleges it was the victim of discrimination and harassment from Amazon’s regional and station managers. The company said in its lawsuit it was singled out from other DSPs, forced to have twice weekly calls with management, was subject to canceled routes the night before delivery that got Amazon off the hook for paying it late cancellation fees, was unfairly assigned delivery routes farther away from the pick-up station and received breach of contract notices that were at times in conflict with its high performance scores.
Amazon did not renew its DSP contract with Shazor, with the company’s final day being March 31.
Shazor said in its complaint Amazon Logistics’ scoring system for DSPs, which are used to gauge performance and determine bonus payments “uses subjective and opaque formulae.”
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“Despite promising DSPs a significant level of autonomy, defendants [Amazon] essentially control all aspects of its DSPs’ business operations, from the type and number of delivery vans DSPs lease, the terms of the leases, the insurance they hold, the personnel driving the vans, what the personnel wear, what amount the personnel are paid, what routes they are assigned, the departure time and length of time for each route (essentially determining when drivers clock in and clock out from their shift), how packages are loaded into the vans and even the order the packages are delivered,” the Shazor complaint said.
Amazon did not respond to a request for comment from Sourcing Journal on the lawsuit.
The company’s DSP program, which counted more than 3,000 partners globally in April, touts a starting cost of $10,000 for the first five vans. As DSPs scale to what Amazon considers “fully ramped,” with between 20 and 40 vans, revenue can potentially range from $1 million to $4.5 million, the company estimated. Profits can range from $75,000 to $300,000 a year.
Amazon’s DSP program launched in 2018 and was followed up with a revised version the next year, called DSP 2.0. That program was structured to give even more control to Amazon, Shazor’s lawsuit alleges.
“Since the introduction of Amazon’s DSP 2.0 program, Amazon has unilaterally imposed dozens of increasingly onerous policies and requirements that DSPs have no choice but to accept and that have made it substantially more difficult, if not impossible, to predictably earn incentive payments,” the lawsuit said.
Shazor, which began delivering packages for Amazon in November 2018, counted 48 vans and more than 70 delivery employees at its peak.
The control Amazon exercises over DSPs is also being challenged in a class action filed in April by Fli-Lo Falcon against Amazon Logistics and parent Amazon.com Inc. in Washington district court. Both the Shazor and Fli-Lo complaints allege the DSP program is structured in such a way as to prevent delivery drivers from forming a union.
The Fli-Lo lawsuit alleges Amazon fraudulently induced companies to join the DSP program by misrepresenting how much they could earn and how much independence they had to run their businesses.
“DSPs do not control their own operations and are restricted from making material adjustments to increase their profits,” the Fli-Lo complaint said.
That lawsuit, similar to Shazor, accuses Amazon of using an “opaque formula and impossible benchmarks to determine how much money DSPs will receive.”
The Fli-Lo case cites Washington’s Franchise Investment Protection Act in arguing Amazon DSPs should enjoy protections under the law as franchisees.
Fli-Lo delivered packages for Amazon from January 2020 to May 2021 and counted 188 total drivers hired during that period.
Amazon last month asked the court in the Fli-Lo case to send the matter to arbitration and any other claims to individually be sent to arbitration, citing terms of the DSP agreement.