Organized Labor’s Final Mile? The Teamsters v. UPS

There are approximately 90 days until July 31, 2023.?

That is the day the largest private collective bargaining agreement in North America expires.?

On April 17th, UPS and the International Brotherhood of Teamsters began negotiating a new agreement. If they are not successful, the fallout could be disastrous.?

Nearly 25 percent of U.S. parcels were shipped via UPS in 2021. This volume represented 6 percent of GDP - but wait: services account for the vast majority of U.S. GDP. If we focus on products and materials, 27 percent of GDP moves in those familiar brown trucks.

70 percent of UPS’ employees are union members, and that number has been growing steadily. 72,000 new Teamsters-represented UPS jobs were added from August 2018 to February 2022, a 25 percent increase. The same is true in reverse; UPS is the largest employer in the Teamsters union.?

There is a lot at stake for both sides in this negotiation. If an agreement is not reached, we will be facing the largest strike against a single business in U.S. history.?

Speaking of History…

In 1997, 185,000 UPS Teamsters went on strike and halted deliveries for more than two weeks. The strike cost UPS an estimated $600 Million in revenue. To put the impact of this strike into context given today’s eCommerce volume, Amazon went public in 1997 and didn’t expand beyond books, music, and videos until the following year.

A similar strike today would involve twice as many workers and stop far more packages from getting to homes and businesses.

The last UPS-Teamsters labor agreement was signed in 2018, and it led to an upheaval in union leadership. 54 percent of union members voted against the deal but the Teamsters ratified it anyway. James P. Hoffa (son of still missing Jimmy Hoffa) was the president of the union at the time. Not only did he decide against running again, but his hand-picked successor, Steve Vairma, was rejected by members in favor of challenger Sean O’Brien. The deciding factor? Vairma was on record as supporting the UPS contract and O’Brien was on record against it.

O’Brien - a Boston guy, I might add - knows what is at stake in this negotiation. He has been rallying union members for months, talking tough about what will and will not be tolerated. While UPS CEO Carol Tomé is trying to take an optimistic tone and talk about win-win (win) scenarios, O’Brien has characterized UPS as a “white collar crime syndicate.”

He regularly references the $100 Billion UPS made during the pandemic, and is making sure union members know what their compensation will be in the case of a strike. He and Teamsters General Secretary-Treasurer Fred Zuckerman will be at the negotiating table with UPS, the first ever Teamsters executives to participate directly in contract negotiations.

Debating the Potential for Cost Neutrality

Parcel shipping volumes are down across the board, and UPS is trying to rein in operating costs. So far, they have insisted upon a cost neutral agreement, where any increases have to be ‘paid for’ by making cutbacks elsewhere.?

Enter Teamsters General Secretary-Treasurer Fred Zuckerman : "It's not going to be a cost-neutral contract. We're going to take from them what our members deserve."

UPS has reported higher margins over the last few years. UPS reported $8.7 Billion in profits in 2020 and $13.1 Billion in 2021, an increase of 51 percent. Making matters worse from the Teamsters' perspective, wages have decreased as a percentage of sales since 1997. Back then, wages were 60 percent of UPS’ revenue; today they represent less than half. Technology certainly amounts for some of that, but not all. And it is a sticking point for union members who have been carrying a grudge for the last 5 years.

Workers naturally want higher wages, but they also want a number of lifestyle-based concessions as well. They want more manageable work shifts, improved safety conditions in trucks and warehouses, and the removal of the surveillance cameras that are currently installed in most trucks.

One issue that has been a point of contention since at least 1997 is the role of part-time employees. “22.4" employees work full time but they are officially considered hybrid, and are paid less as a result. Another concern is the sixth or seventh day “punch,” where workers are expected to pick up sixth and even seventh consecutive workdays to cover delivery volumes.

Federal Government to the Rescue?

When the railways and railway workers’ unions were staring at a labor contract impasse in 2022, Labor Secretary Marty Walsh (also a Boston guy) stepped in to help. He has since left the Biden administration to become the Director of the NHL Players Association.

His second in command, Julie Su, is working her way through the Senate confirmation process to become the new Labor Secretary now. She faces criticism from both sides of the aisle based on how her office handled the distribution of unemployment benefits during the pandemic when she was California's Labor Secretary. They distributed $30 Billion in fraudulent jobless benefits - even after receiving a warning from the Federal government. That said, she has been endorsed by the Teamsters.

One difference between the railway workers’ strike and the threat of a strike on the part of UPS Teamsters is Federal law. While the Railway Labor Act would have allowed Congress to intervene in defense of interstate commerce, the UPS-Teamsters negotiation is subject to the Taft-Hartley Act. It would place the responsibility on the President of the United States to intervene in the case of a potential strike. And (just in case you hadn't noticed) a new presidential election cycle is getting under way. That always leads cooler heads to prevail. (Not.)

Plan B for Shippers

UPS currently holds 37 percent of the U.S. parcel shipping market, followed closely by FedEx at 33 percent. FedEx extended an offer to anyone who wanted to move their parcel volume from UPS to FedEx, but it expired on April 1st. Now shippers looking for an alternate carrier will have to make do with whatever capacity they can find - at whatever price.

The clock is ticking on this negotiation. July 31st is the deadline and the union has stated that there will be no extension, despite having a shorter than usual timeframe to work in. UPS is convinced they will be able to arrange a deal in time. The rest of us can only watch and wait… knowing that the final mile in this deal could be a bumpy ride.

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