Turn On, Clock In, Clock Out

Employees “Can’t Quit” This DIY Payroll Software

A Boring Business Quietly Compounding at 30%

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To Suzanne Davis, Amazon’s new “same-day delivery” service sounded like a lifesaver.

The reality was… it could have killed her.

Fortunately for her, Suzanne wasn’t home on June 19, 2016, when an Amazon package was delivered directly into her dining room… via a truck that crashed through the front wall of her house.

As documented in subsequent court proceedings against Amazon, Suzanne’s Dallas residence “sustained severe structural damage to the interior and exterior of the home, foundation, dining-room window, exterior brick, inside wall near the window, shrubbery, outdoor lighting, and sprinkler systems,” to the tune of some $140,000.

But technically, Amazon wasn’t even responsible.

The retail giant wasn’t liable for the actions of Oladaya Anipole, the delivery driver who’d mistaken the accelerator for the brake, and then backed out of Suzanne’s gutted dining room and attempted to flee the scene. (Worse, he was still behind the wheel although he’d been in another traffic accident the week prior.)

Anipole was driving a truck full of cardboard boxes with smiling arrows on the side. But he wasn’t an Amazon employee. As Suzanne’s lawsuit revealed, he actually worked for a third-party trucking company called Inpax – one of many independent “partners” in Amazon’s opaque army of contract delivery trucks. 

Turns out, there’s actually no such thing as an “Amazon driver.” There are just third parties that contract with, and make deliveries for, the online superstore. Amazon pays these trucking companies (known as Delivery Service Partners, or DSPs) to deliver instant coffee and toilet paper to your doorstep (or, in Suzanne’s case, through your wall). 

Amazon provides the trucks, uniforms, and training (and quotas to fill), and the DSPs hire the drivers and handle all the pesky details like wages, insurance, healthcare benefits, payroll, and bathroom breaks.

At least, they’re supposed to handle these details…

Buy Now, Pee Later

In reality, DSPs have just one priority: Keep Amazon happy by delivering 250 packages, per truck, per day… thanks to drivers who work 12 to 15 hours straight and deliver 25 packages an hour (one every 2.4 minutes). One trucking firm, TL Transportation, enforced such a punishing schedule that drivers didn’t have time for bathroom breaks, and had to urinate in water bottles. (Have you ever really thought about what happens after you click that magic “Buy Now” button?) 

It’s not surprising that Oladaya Anipole drove through Suzanne Davis’s wall. Perhaps he had to pee… really badly.

For all that agony, you’d expect these drivers to be paid competitively… but you’d be wrong.

The worst thing about the initial DSP model – according to a slew of drivers that Business Insider interviewed in 2018 – was rampant wage theft.

Inpax – Oladaya Anipole’s employer – was repeatedly cited by the Department of Labor for withholding pay from its drivers. Prime EFS, another trucker, refused to pay employees the owner didn’t like. Many of the smaller contracting companies handled their payroll manually, without outside oversight – and often stiffed drivers of thousands of dollars in wages, on purpose.

TL Transportation, for instance, paid a flat rate of $160 a day, which they claimed covered eight hours of work plus two hours of “automatic overtime.” A court ruling against TL objected that this was wage fraud: “Overtime compensation must be specifically linked to the hours an employee actually worked.” 

And employees who did work more hours simply didn’t get paid at all…

One TL driver put in eight hours a day, seven days a week… plus 30 hours overtime. Her pay stub only showed the flat rate of two hours of “overtime” per day. Another employee worked 13 hours every day… and still took home the same flat rate of $160. This sad tale was repeated across many, many DSP trucking companies – and documented in a series of exposés in Vice magazine and Business Insider.

Eventually, bad publicity started to move the needle… a little. 

In 2017, a group of disgruntled drivers banded together to launch multimillion-dollar class-action lawsuits against both their DSP direct employers and Amazon.

Amazon still refuses to admit any wrongdoing, but has agreed to pay a group of Seattle-area drivers (the ones who had to pee in bottles) an $8.2 million settlement. Amazon has also been directed to fork over $6.4 million in a separate, ongoing California wage-theft lawsuit, but (again claiming innocence) is appealing the case.

In the meantime, in 2018, Amazon quietly cracked down on wage fraud by requiring its DSP contractors to use real, professional payroll software.

The trucking companies now electronically track and record drivers’ hours with HR-friendly computer programs that track and monitor paychecks… ensuring that employees work a reasonable number of hours, clock in and out at accurate times, and get paid for the actual overtime. 

And – not surprisingly – the wage-theft lawsuits have slowed down, too.

It’s not a bathroom break, but at least it’s a start.

In this issue, we’ll be exploring one of the payroll software companies that’s saving Amazon Prime (and many other businesses).

The company is a leading provider of human capital management (“HCM”) software. The company’s innovative products deliver significant time and cost savings for human-resource (“HR”) departments, by automating things like payroll processing, benefits management, and expense reports. 

The company’s technological leadership has led to rapid market-share gains from its larger and more established rivals. Its lean cost structure has translated into world-class 85% gross profit margins, and a highly capital efficient business model with 27% returns on equity (“ROE”). The stock has delivered 30% compounded returns a year for investors since it went public in 2014.

Controlling only 5% market share today, the company has a long growth runway to continue delivering market-crushing returns.

It all started with a scrappy 27-year-old, who bootstrapped the business with 14 personal credit cards. 

Bringing Payroll Into the Digital Age