Postal Service contractor to cut 450 jobs, close 2 facilities in California

November 22, 2023

Amid an ongoing financial dispute with the U.S. Postal Service, Matheson Flight Extenders (MFE), a mail processing, transportation and logistics contractor, plans to lay off more than 450 employees by Dec. 15 and close its mail sorting facilities in California.

Since mid-September, Sacramento, California-based MFE has filed three Worker Adjustment and Retraining Notification (WARN) Act notices with the California Employment Development Department (EDD) of the permanent layoffs of 72 employees, including truck drivers and material handlers, at its facility in San Leandro by Dec. 15. MFE is also closing two Surface Transfer Centers, which will result in job cuts of 124 workers by Dec. 5 in Sacramento. Another 257 workers were slated to be permanently laid off at its Long Beach facility by Nov. 13, although there was a possibility the timeline could be extended, according to the WARN letter.

As of publication, MFE did not respond to FreightWaves’ request seeking comment about whether the 257 workers in Long Beach had been let go.

Under the WARN Act, employers with more than 100 employees at a location must give authorities a 60-day advance notice of a planned closure and job layoffs.

MFE and Matheson Postal Services are wholly owned subsidiaries of Matheson Trucking. The family-owned entities, founded by Robert and Carole Matheson in 1962, filed for Chapter 11 bankruptcy in May 2022. MFE has been providing services to the Postal Service since December 1998.

The filing listed both its assets and liabilities as between $10 million and $50 million.

In August, MFE also announced it was eliminating nearly 1,000 jobs and closing its sorting facilities in Chicopee, Massachusetts, Atlanta and Brandywine, Maryland.

Major sticking points between MFE and the Postal Service were over the two Surface Transfer Centers in Atlanta and Brandywine that were closed in late October. When MFE took over as the contractor for the mail sorting centers in November 2021, the contractor claimed the high-speed sorting equipment was not operational, around one-third of the loading docks weren’t functioning and the former operator’s staff had not been fully trained and few were retained with MFE after the transfer, according to court documents.

As the Postal Service was facing its holiday peak mail delivery season, court filings state that it began immediately directing normal peak volumes of mail to the facilities that MFE had just taken over but weren’t fully functional. The Maryland facility experienced a 4-mile-long train of tractor-trailers waiting to unload mail at the facility due to an alleged planning flaw by the Postal Service, MFE claimed in court documents.

“USPS demanded that MFE take immediate steps to address these problems and ensure timely delivery of mail. Among other things, at USPS’s direction, MFE incurred significant costs to repair the facilities to make them fully operational,” according to court filings.

As a result of ongoing issues, MFE negotiated a $15 million payment advance from the Postal Service to address problems, including the need for temporary labor to sort the mail by hand since the mail sorting equipment wasn’t operational. According to the deal reached between MFE and the Postal Service, MFE was to start repaying $300,000 per month starting in July 2022 with a balloon payment at the end of the three-and-a-half-year agreement.

MFE claims it incurred nearly $24 million in reimbursable costs from the Postal Service associated with the Atlanta and Maryland mail sorting facilities but that it “balked” about reimbursing MFE for the “ramp up” costs to make the mail sites operational.

While mediation has been ongoing between the parties since May, MFE claimed in a September court filing that over the previous 90 days the Postal Service “continued to either terminate or transfer to competitors several of MFE and MPS contracts.”

Court filings state that in mid-August MFE received notice from the Postal Service that its “$20-plus million claim could not be completed without further documentation and no decision on the claim could be expected before March 2024.”

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