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More than 1,200 licensed Amazon delivery drivers

More than 1,200 Amazon delivery drivers have been laid off in recent months after the company severed contracts with several small delivery companies across the country.

Amazon has notified at least seven companies that are part of its Delivery Service Partner Program, or DSP, that it is breaking their contracts. The companies said they would lay off about 1,205 drivers and pull out of Amazon facilities as part of Worker Adjustment and Retraining Notification, or WARN, documents submitted this month and in recent months to officials of State. The WARN Act requires employers to provide notice, usually within 60 days, of mass layoffs and plant closures.

Amazon’s DSP program, launched in 2018, has allowed the company to rapidly increase its last-mile delivery capabilities and compete with shipping partners such as UPS and FedEx. DSPs are contracted delivery providers, usually recognizable as Amazon-branded pickup trucks, who are responsible for picking up packages from Amazon delivery stations and delivering them to the door.

Many companies affected by Amazon’s elimination of DSPs have announced layoffs in several states and closed sites, although the Amazon delivery stations from which they operate remain open. Courier Distribution Systems, a Georgia-based delivery partner, is laying off 273 drivers in Pennsylvania and Wisconsin. Massachusetts-based Systemize Logistics is closing locations in Connecticut and New York, eliminating 121 jobs.

Elsewhere, Maryland-based TL Transportation is cutting 80 jobs in Pennsylvania, while closing a plant in New York, resulting in 76 layoffs. New Jersey-based Prime EFS was forced to lay off 388 employees in the state and Pennsylvania. JST Transportation laid off 51 employees in Massachusetts and Deliverol Global cut 41 jobs in Pennsylvania. Sheffield Express laid off 95 employees in Connecticut and announced it would close its facilities there.

An Amazon spokesperson told CNBC in a statement that the company regularly evaluates its partnerships with carriers. In another recent round of layoffs, beginning in February, the company terminated contracts with Transportation Brokerage Specialists, Bear Down Logistics, Express Parcel Service and Delivery Force, among several other companies, resulting in at least 2,000 layoffs .

“We have terminated relationships with some partners and Amazon is working closely with all affected drivers to ensure they find opportunities to deliver Amazon packages with other local delivery service partners with little or no payment interruption,” the spokesperson added.

Courier Distribution Systems, Systemize Logistics, TL Transportation, Prime EFS, JST Transportation, Deliverol Global and Sheffield Express did not respond to requests for comment.

As Amazon continues to weed out underperforming delivery partners, the program has grown rapidly since its launch two years ago. There are now more than 1,300 DSPs in five countries that have added 85,000 jobs and delivered more than 1.8 billion packages worldwide, Amazon said in a blog post earlier this month. So even with the recent cuts, Amazon has added many new partners to pick up the slack.

The DSP program is an enticing prospect for aspiring business owners. Amazon promises start-up costs as low as $10,000 to launch a delivery fleet and the potential to earn $300,000 a year once a fleet grows to 20-40 vans.

But the ease with which Amazon can cut contracts with DSPs shows that the program is not without risk for entrepreneurs who choose to launch their own delivery service.

In some cases, the loss of a contract with Amazon can be a blow to a DSP’s business. Transportation and Logistics Systems, the parent company of Prime EFS, said 74% of its revenue for the year ended December 31, 2019 was attributable to Prime EFS’ DSP contract with Amazon.

For others, Amazon’s decision to end a contract may seem abrupt, including at IntelliQuick Delivery Inc., an Arizona-based delivery contractor. IQDI informed employees on July 1 that it had lost its contract with Amazon.

“This is a complete shock to our business as a whole and I can assure you the decision was not based on performance,” the company said in a notice to employees, obtained by CNBC. “We will continue to run routes as usual to provide service to Amazon until July 18, 2020.”

It’s unclear how many IQDI employees lost their jobs as a result of Amazon’s contract termination. IQDI representatives did not respond to multiple requests for comment.

Phillip Cullinane, IQDI driver in Salt Lake City, said “everyone at [the Utah location] was laid off.” The Salt Lake City location recently doubled its workforce to about 80 employees to respond to the pandemic-fueled surge in online shopping, Cullinane said.

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