TOTAL QUALITY LOGISTICS SHIPS UNTIL THEY DROP
Ken Oaks and friends have built TQL into a multibillion-dollar company, but thousands of ex-employees are suing the company for their fair share of the success.
By Jim DeBrosse – June 19, 2020
Like other young people fresh out of college in the Cincinnati area, Michelle Yenser was looking for a job that would help pay off her burdensome student loan debt. It was 2009, and she’d just graduated from Miami University’s business school.
Sales work immediately came to mind because, she remembers thinking, The harder you work, the more money you make. With help from Miami’s recruitment office, she found Total Quality Logistics, a freight brokerage firm whose ads promised “endless opportunities for those who are self-motivated and dedicated to success.”
Headquartered in Clermont County’s Union Township, TQL is now the largest privately owned company in Greater Cincinnati. How? “It’s plain and simple—we work harder than anyone else in the business,” its website says. TQL’s founder and CEO, Anderson Township native Ken Oaks, is a near-billionaire and the wealthiest person in Cincinnati. TQL has consistently been named one of the best places to work in the region and in the country by dozens of business publications, including Forbes and Fortune magazines.
But it didn’t work out that way for Yenser and thousands of other former TQL employees. She lasted longer than most TQL recruits: a year and half, first as a sales trainee at $33,000 per year and then as a junior account executive/broker who was paid a salary plus commission. The salary, however, has to be covered by the sales revenue a broker brings into the company. Many former TQL employees say that’s difficult, if not impossible, for all but a tiny percentage of new recruits, no matter how many hours they work.
Some 4,500 former employees are now part of a class action suit against TQL in what local attorneys say could be the largest wage settlement case in Cincinnati history, claiming the group was collectively cheated out of tens of millions of dollars of overtime pay while struggling to make it under the company’s boiler room conditions. After 10 years of filings and motions on both sides, the lawsuit is scheduled to go to trial in July.
“If you want to make it there, you have to work really, really hard,” says Yenser, 32, who now sells for a pharmaceutical company. She isn’t part of the class action suit against TQL. “I was going in at 7 [a.m.] and leaving at 7 [p.m.],” she recalls, as well as taking phone calls from customers any hour of the day or night, including weekends and holidays. “I would get calls on Christmas Day or New Year’s Day. Say a refrigerated truck with a load of chicken breaks down, and it’s a holiday and you’re with your family. You still have to fix it. You’re glued to your phone—it could take minutes or it could be hours.”
On top of managing freight shipments, brokers at TQL typically make 75 to 100 sales calls a day trying to drum up new customers, many of them first-time “cold calls” to shipping agents who hear daily from other brokers, including other brokers within TQL, Yenser says. “If you’re trying to make the most money, you’re going to go for the biggest companies, and everybody tries to get the same big customers. The people who make it have to be kind of cutthroat and kind of lucky.” For Yenser, the luck ran out when her biggest customer canceled the account over an incident she prefers not to discuss publicly.
Fueled by hard work and what critics call unrealistic sales pressures, TQL has had a remarkable run since Oaks launched it in 1997. And then came COVID-19, working from home, and a new economic model. Analysts say it’s still too early to predict the pandemic’s full impact on the logistics industry, but it’s certain that a slowdown in the trucking industry that began in 2018 will continue. “Given the largely uncharted waters we are in, it is likely to be a slow, drawn-out process in order to return to ‘normal,’ or even a semblance of that,” Jeff Berman, group news editor of Supply Chain Management Review magazine, wrote in a March column.
Transportation logistics is one of the fastest growing U.S. industries, quadrupling in revenues from $57 billion in 2000 to more than $213.5 billion in 2018, the latest figures available from Armstrong & Associates, a market research and consulting firm. The modern transportation logistics industry was launched in the 1980s with the deregulation of the trucking industry, then exploded in the 1990s and onward with the growth of the internet, GPS tracking, and mobile technologies transforming every other part of our lives.
Logistics companies like TQL are matchmakers between the nation’s 1.2 million trucking firms that deliver goods (carriers) and the hundreds of millions of companies that need more than 11 billion tons of freight moved safely and on time every year (shippers). At TQL, brokers negotiate rates with carriers and shippers, find the most efficient “lanes” or routes for delivering and picking up loads, and track the loads until they reach their destinations. If brokers generate a positive margin as a result of those negotiations, they pocket a portion of it as commission.
Shipping products from point A to point B may seem simple, but it’s not, especially when carriers and shippers are at the mercy of fickle weather, road conditions, inevitable traffic accidents, and equipment breakdowns, not to mention outright theft and the foibles of truck drivers who can sometimes go AWOL. But there’s plenty of data crunching, tracking, and communication software out there to help make the system more manageable. TQL has been an industry leader in developing and adopting those new technologies, including mobile apps that allow customers to track their own shipments and interact directly with brokers.
In 2018, TQL was the go-between for more than 1.5 million truckloads carrying nearly everything that touches our lives: food and beverages, chemicals and plastics, pharmaceuticals and healthcare products, automotive parts and electronics, and a multitude of retail and consumer goods. Armstrong & Associates ranked TQL second in the nation among freight brokerage firms in 2019. According to company figures, it grew from $52 million in revenues in 2003 to $3.6 billion in 2018, a mind-boggling factor of more than 70 times.
At its peak earlier this year, TQL employed more than 5,500 people at 57 offices in 26 states, from Boston to Phoenix and Minneapolis to Ft. Lauderdale. Nearly 2,000 worked in its four Cincinnati area offices. The company is doubling the footprint of its headquarters on Ivy Pointe Boulevard in Union Township, with construction in view of motorists along I-275, in order to add 600 employees. At least that was the plan before the pandemic hit.
TQL terminated “a number of employees” in March for underperformance, says Tom Millikin, the company’s corporate communications manager. But according to Freight Waves, a leading market research and news website for the freight industry, the company laid off as many as 700 workers due to an inability to handle everyone working remotely on its virtual network. Former employees and industry insiders told the website that TQL fired them without severance packages, extensions on their health insurance coverage, or waivers of the company’s ironclad non-compete clause if they hoped to seek other jobs in the industry.
With its central location and access to nearby interstates, the Cincinnati area has become a regional hub for logistics companies. But TQL has also played a big role in the creation of that hub by developing and then spinning off talent who formed their own companies. There are now 24 logistics firms in Greater Cincinnati with revenues of more than $10 million each, according to a 2019 Cincinnati Business Courier survey. Many of the departing employees who became TQL competitors wanted a better work-life balance, including Ryan Legg, Oaks’s original business partner. Legg and his wife Denise started MegaCorp Logistics in 2009 because they “wanted to create an employee-centric, family-oriented business where their employees could thrive,” according to a MegaCorp press release.
Ken Oaks declined an interview for this story, but the record shows that he was one of the smart few who jumped hard on the right idea at the right time. Two trends created the U.S. logistics boom, says Lisa Ellram, a professor of supply chain management at Miami University. The deregulation of the trucking industry in the 1980s opened the way to negotiated shipping rates, and the internet’s rapid growth provided an easy platform for brokers to connect carriers and shippers. Oaks, who graduated from McNicholas High School in 1983 and the University of Dayton in 1987, saw the opportunities while working as a produce buyer and salesman for Cincinnati-based Castellini Company, one of the nation’s largest distributors of fresh produce.
From the beginning of TQL, Oaks has recruited to his management team many of his former McNicholas football teammates. The 1983 team yearbook photo reads like a page from the future TQL executive playbook: Center No. 52 (CEO Oaks) hikes the ball to quarterback No. 7 (president Kerry Byrne), who hands off to tailback No. 23 (CFO Mike Zins), who drops back and throws long to wide receiver No. 15 (executive sales director Gary Carr). Touchdown, Rockets! And coming off the bench is freshman halfback Jeff Montelisciani, TQL’s vice president of sales. Former McNicholas football coach George Markley remembers the 6-foot-2 Oaks as “a quiet leader, a very efficient blocker, someone who completed his assignments as directed. He was never any problem. He was a willing worker.”
“Athletes are definitely the type of personality they’re looking for—the competitiveness and the ability to keep going in the face of No!” from cold-call customers, says Devin Reilly, a former safety on the St. Xavier football team. Reilly worked at TQL from 2005 to 2012 before leaving to start his own company, Custom Pro Logistics, which moved from Hyde Park to Over-the-Rhine in 2016. Kerry Byrne, who did give an interview for this story, says recruiting former players makes sense. After all, they learned on the field how to have each other’s backs—literally. “Trust is the first thing,” he says. “One of our guiding principles here is we value teamwork.”
TQL’s executive Gang of Four was part of a larger group of about a dozen boys at McNicholas who hung out together and still do decades later, taking golf trips and family vacations together, says Karen Veeneman (née Yorio), who knew the group while attending both Holy Angels Elementary School and McNicholas. She remembers that “all of them played football or baseball together and, of course, they were all cute. The girls all seemed to know them.” (She would later marry one of the group’s “cute guys,” Mike Veeneman.) From McNicholas, she went on to the University of Dayton with Oaks and Zins, both of whom played on the rugby team there.
Oaks used to get his hair cut by Veeneman’s roommate in their dormitory hallway. (“The same trim. He still looks a lot like he did back then.”) Veeneman describes Oaks and his buddies as typical, hardworking high school kids “because our parents just didn’t hand everything to us. Everyone had to work in some capacity.”
After college, in the 1990s, many of the same group would hit the budding singles scene on Main and Sycamore streets in Over-the-Rhine. Veeneman remembers even then that “it would be 12 o’clock at night and we would all be having a good time, and [Oaks] would be out on the sidewalk on his phone and I’m thinking, Man, this guy is serious” about his job. Oaks has always shied from attention, she says. “He really doesn’t like to be praised. He’s a very humble person. He’s done very well for himself, but if he walked down the street, no one would think a thing about him being successful. He’s just another guy in a pair of jeans.”
After winning the Carl H. Lindner Award for Entrepreneurial and Civic Spirit in 2017, Oaks told The Enquirer that he started TQL because he “saw the need for a higher level of service in the transportation industry that ensured customers received 24/7/365 service and honest, ethical, and proactive communication. So I leveraged everything I had and opened Total Quality Logistics in 1997. Over the years, we have consistently grown by hiring high-quality people with a great work ethic and incentivizing them to provide consistent, incredible service to our customers.”
The former employees in the ongoing class action lawsuit against TQL argue the company was built in large measure on the backs of exploited young people. In a 2011 amended complaint filed in federal court here, plaintiffs tell a similar story—that they were expected to work 60 hours a week while on-call 24/7 for their customers, then discarded if they couldn’t meet the company’s sales revenue demands. The suit alleges the former employees were cheated out of their overtime pay because TQL had illegally exempted them from provisions of the U.S. Fair Labor Standards Act (FLSA), a law that dates back to 1938 and the Great Depression. Neither side will talk about the case publicly. But at the heart of the legal dispute is whether TQL trainees and brokers fall under one of the three classes of exemptions for overtime pay allowed by FLSA: executive, administrative, and professional.
TQL argues that its trainees are exempt as administrative employees, which traditionally has meant office workers, IT staff, and others who support management or operations. But lawyers for the former employees argue that TQL trainees spend six months in the classroom, then primarily act as assistants to brokers who are selling the company’s product, not managing its operations. As for its brokers, TQL argues that they’re exempt from overtime pay as commissioned employees. Plaintiff lawyers say the law requires that exempted employees earn more than half their pay from commissions. Many TQL brokers can barely cover their salaries, much less earn twice as much from commissions, plaintiffs argue. Those who can’t cover their salary with sales revenue within the first year are let go or, as company officials say, sometimes transferred to other company departments.
TQL won’t say what its dropout and turnover rate is among recruits, but Bruce Meizlish, one of the Cincinnati labor attorneys representing the lawsuit’s plaintiffs, said he doubts any more than 5 to 10 percent of young recruits make it to the one-year mark as commissioned brokers. “What really happens is that [TQL] gets a large number of new hires—and a large number of those tend to be recent college grads—and tells them, If you go out there and kick butt, you’re going to make a bunch of money,” Meizlish says. “Like most organizations, though, that’s really not what happens in most cases. People can form their own opinions on [TQL’s] business model, whether they think that’s a good thing or a bad thing or they just don’t care.”
Oaks told Inc.com in a 2013 story headlined “Hiring Rule #1: Slackers Need Not Apply” that the average yearly pay for a second-year TQL employee was $60,000. After three years, the average jumps to $81,000, and, after four years, to $112,000. But he acknowledged in the article that the jobs weren’t for everyone. “It’s high stress, high pressure, but a lot of these people thrive on that.” Company spokesperson Millikin says the average pay ranges from $53,000 to $79,000 a year for brokers who have been selling one to three years and $104,000 to $120,000 per year for those selling three to five years.
Byrne says the company prides itself on the quality of its training program for new recruits and for giving them the tools they need to succeed. And, he adds, no one is hiding the truth of its high-pressure operation from new hires. “We’re a sales organization, so we’re always going to have turnover,” he says. “To mitigate that, we make sure the applicant really knows as much as they can about what it is that we do. So that’s why we provide as much information [as we can] and they shadow brokers throughout the job and the application process.”
In pre-pandemic days, TQL also provided a variety of antidotes aimed at de-stressing its mostly millennial employees, including monthly and holiday-themed patio parties at headquarters, Friday afternoon office “beer drops” (or water or soda, if you prefer) when the sales force exceeded its weekly revenue goal, and fund-raising shenanigans like a semi-tractor pull for cancer research, trivia night contests for the Cincinnati Youth Collaborative, and a “Toss the Boss” event when Oaks and 14 other employees rappelled down the company’s four-story headquarters to raise money for Big Brothers Big Sisters. The “TQL Cares” webpage says the company and its employees have an annual impact of more than 6,000 volunteer hours and $2 million donated to more than 2,800 charitable organizations.
Online reviews of the company’s work culture are decidedly mixed among former and current TQL employees. A longtime employee who gave the firm five out of five stars posted this on Glassdoor: “Pros: Clear goals for Sales with training to succeed. High energy. Clear direction by Sr Leadership with open access to ask questions. Great perks (beer drops, patio parties, relaxed dress code, employee appreciation events and even had a camel and kangaroo visit). Cons: Fair amount of turnover. Pay and benefits are good but not great.” But an employee who worked there less than a year posted a one-star review under the headline “Don’t do it!”: “If you are desperate enough and believe that after 26 weeks of training making $35,000 you will be able to make $100,000 then you are crazy. First of all you work for a Broker who is basically training you. You make all his calls and do all his work while he is supposed to be trying to get more. . . . After 6 months when your training is up, if you are not hitting the revenue, and you won’t be, then you will be terminated. . . .”
Chris Bregger, a former TQL trainee who went on to sell paper products for Millcraft, offers an opinion somewhere in the middle. Bregger joined the company after graduating from the University of Cincinnati in 2012 and left just six months later, but credits TQL’s “unparalleled” sales training with launching his career. “People pay thousands of dollars to get that kind of training,” he says. “But if you hate it, you hate it. It’s just about logging hours and hours making calls, and you have to be willing to answer the phone any time of the day or night. It wears on you.”
Perhaps the strongest testament to TQL’s training program is that so many of its competing logistics companies were started by former TQL employees. “If you talk to other brokerage firms in the area, most of [their owners] have worked for TQL at some point,” says Lacy Starling, who calls herself “President and Fearless Leader” of Florence-based Legion Logistics. Starling launched the company 10 years ago with then-husband Tony Coutsoftides, who had been one of TQL’s top sales people. He’s billed as Legion’s “CEO and Freight Guru.”
Starling says she and Coutsoftides, who divorced eight years ago but still work and raise their daughter together, decided they wanted to build a more family-friendly work culture than other companies in the region. At TQL, brokers operate like individual businesses, competing for their own customers and then taking “cradle-to-grave” responsibility for all of their transportation needs, day or night. “We wanted to create an environment that offers a little bit more balance for employees, that you don’t have to be working 24/7 every single day,” Starling says. “So we have a team approach to our sales. Our team works together to service all of our customers, and then we’ve got one person [from the team] on call for a week and we rotate that as well. If you’re going to attract people with families, if you want to retain employees, you have to create an environment where they feel like they can do this job and take a vacation with the family.”
Despite the growing competition—including recent entries into the industry of national heavyweights like Uber Freight and Amazon—TQL continues to grow with its hard-charging business model. “There’s a lot of discussion about potential disruption in brokerage with some of the new players,” says company president Byrne. “How do we compete? Like we’ve always competed. Be very good at what we do. Offer superior customer service. And make sure that we are on the front lines of technology. We don’t want to be the first ones to develop everything, because we want to make sure people want it. So we’re in the process now of getting out to our top customers and carriers and asking, What do you really like? What do you want?”
“I’m not someone who likes to speak poorly of a place where I learned a lot,” says Devin Reilly, owner of Custom Pro Logistics. “But certainly the individual isn’t someone that’s really cared for [at TQL]. They’re treated more like plug and play.”
Byrne says he’s confident the company will continue to adapt and grow. In recent years, TQL has boosted growth by expanding its brokerage service to include less than full truckloads and intermodal transport that uses both trucks and trains. A key component, too, has been the company’s continuing focus on developing new technologies, including automated dispatch for carriers, enhancements to its mobile app for customers who want to book and track their own shipments, and the use of artificial intelligence to handle back office tasks like billing and scheduling. The new $20 million addition to the current headquarters building will accommodate a booming IT department, growing its 230 employees to 300 by year’s end, says TQL’s Millikin.
On the sales side, Byrne says TQL will stick to its tried-and-true approach of “single source accountability” in which brokers, with the help of trainees, vie for their own customers and then handle all their needs 24/7/365. Coordinating all tasks in one point of contact rather than dividing and rotating the workload among teams prevents miscommunication and lost loads, he says. “Folks told us early on that we couldn’t scale with that [approach], but we have been able to scale. I guess there are pluses and minuses to both, but this is what we’ve always done, and it’s worked for us.”
But perhaps not for the thousands of employees who have departed TQL over the years. “I’m not someone who likes to speak poorly of a place where I learned a lot,” says Reilly, owner of Custom Pro Logistics. “But certainly the individual isn’t someone that’s really cared for [at TQL]. They’re treated more like plug and play.”