A franchise in disguise? Amazon’s Delivery Service Partners program will face a key legal test

A new lawsuit challenges the legal status of a program that Amazon uses to deliver packages to doorsteps around the world. (GeekWire File Photo)

Amazon “exercises near complete control” over the thousands of ostensibly independent companies that deliver packages for the e-commerce giant, a new lawsuit alleges, treating them as de facto franchisees without the legal protections that would come from such a designation.

The proposed class-action lawsuit was filed in federal court in Seattle this week by a company called Fli-Lo Falcon, LLC, that says it delivered packages for Amazon in the Sacramento, Calif., area from October 2019 to May 2021.

It’s the latest in a series of suits by Delivery Service Partners (DSP) companies against Amazon, alleging unfair treatment, false promises about profits, and unlawful termination of their delivery contracts.

But the latest case puts a particular emphasis on challenging the legality of the underlying business relationship between Amazon and Delivery Service Partners companies, as contracted through the Seattle-based company’s subsidiary, Amazon Logistics, Inc. (ALI).

Under the DSP program, delivery companies are specifically not designated as franchisees. Such a classification would give delivery companies protection from termination of their contracts without showing good cause, and prevent Amazon from requiring DSPs to work with specific vendors, among other protections, the suit says.

“Despite promising DSPs a significant level of autonomy, the DSPs are not independent businesses and their activities are dictated and run by Amazon through ALI,” the suit alleges. “Amazon requires its DSPs to make a substantial investment and to use certain vendors under Defendants’ terms.”

It continues, “DSPs do not control their own operations and are restricted from making material adjustments to increase their profits. ALI uses a subjective and opaque formula with impossible benchmarks to determine how much money DSPs will receive. DSPs are liable for acts of the drivers, who are pressed to meet the delivery schedules mandated by ALI. Finally, DSPs are assessed costs by ALI if they try to exit the DSP Program.”

Among other claims, the suit alleges that Amazon Logistics can unilaterally fire DSP drivers “for certain purported infractions” and then fine DSP companies for not having a driver to cover the route.

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Amazon did not respond to GeekWire’s request for comment on the Fli-Lo Falcon lawsuit.

In a 2021 statement to Bloomberg News, a spokesperson said Amazon was committed to improving the program, adding, “The majority of DSPs consistently out-pace our marketed profit expectations for the program, and this year we invested $700 million to support DSP rate increases, sign-on and retention bonuses and recruiting costs.”

The current DSP program, launched in 2018, is part of a broader effort by Amazon to extend its last-mile delivery capabilities, including new Delivery Stations across the country. By working with delivery partners, Amazon is able to shield itself from many of the financial and legal liabilities that would come from employing drivers directly.

As of last year, Amazon said there were 2,500 DSP companies employing 150,000 drivers around the world, many of whom deliver packages in Amazon uniforms and dark blue vans with the company’s logo.

Previous lawsuits have been filed by former DSP companies in states including Oregon and North Carolina. Investigations by news organizations including Bloomberg and Vice have spotlighted the challenges cited by many DSP companies. Amazon settled a lawsuit filed under a prior version of the program for $8.2 million last year.

A 2018 analysis by GeekWire, after the announcement of the current version of the program, pointed out the financial challenges that Amazon DSPs would face under the terms set by the company.

The lawsuit proposes to represent all businesses that executed Delivery Service Partners contracts with Amazon Logistics from 2019 to the present day. It seeks a total financial award of three times the actual damages determined to be sustained by members of the class. Read the full lawsuit here or below.

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Amazon Delivery Service Partners Lawsuit by GeekWire on Scribd

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