UPS Freight, Teamsters labor impasse may be coming to a head

Recent developments regarding a new labor agreement between UPS Freight, the les-than-truckload unit of UPS, and the Teamsters Freight National Bargaining Committee over a new labor contract could have ramifications that potentially lead to a strike, or the semblance of one.

Late last week, the Teamsters UPS Freight National Negotiating Committee issued a notice to all UPS Freight Teamsters members from Kris Taylor, co-chairman of the Teamsters National UPS Freight Negotiating Committee, stating that the committee received a “Last, Best and Final” contract proposal from UPS Freight, with the proposed tentative agreement was rejected. Taylor stated that on October 5 the proposed tentative agreement was rejected, with the negotiating committee telling UPS that the 30-day extension agreement would end on Monday November 12 at 12:01 a.m. The previous five-year UPS Freight labor contract expired on July 31.

The Teamsters UPS Freight National Negotiating Committee met on October 22 and compiled a list of issues that it said have been presented to UPS, with the negotiating committee insisting on: tighter restrictions and limits on subcontracting and rail usage; higher wage increases that are not split; earning protection for city drivers when they perform dock work; elimination of the new qualifiers for pension and vacation benefits; and a week’s worth of vacation pay for all classifications based on 1/52 of the prior year’s earnings.

While UPS Freight Teamsters have received a Last, Best, and Final Offer (LBFO) from UPS, Taylor said the negotiating committee has determined that the LBFO does not sufficiently address issued raised by its members.

“Nevertheless, because of the company’s insistence that there is no more money to be had and in order to allow you to make an informed decision on a question that will affect you and your family, the negotiating committee decided to submit the LBFO for acceptance or rejection,” wrote Taylor. “You have already authorized a strike. While a strike is a last resort, if you reject this final offer from the company there will be no other options and there will be a strike at a time and location(s) determined by the negotiating committee.”

But UPS has made it clear it is not budging on its stance either. In UPS Freight letter to customers obtained by LM, UPS said that it believes the new contract proposal should be ratified and “is an offer that rewards its employees with wages and benefits at the top of the industry and compensates them for their contributions to the success of the company.”

The letter added that the UPS Freight Teamsters employees will have a union-hall vote, with ballots to be casted between November 7-11, adding that at this time UPS does not have an extension in place to the current UPS Freight contract.

And due to this situation, in an effort to ensure transparency and not put customer volume at risk, UPS said that effective today, November 1, UPS will not pick up any UPS Freight volume with a delivery date after November 8.

“The last day UPS will pick up UPS Freight will be Thursday, November 1 for five-day shipping commitments; Friday, November 2 for four-day shipping commitments; Monday, November 5 for three-day shipping commitments; Tuesday, November 6 for two-day shipping commitments; and Wednesday, November 7 for one-day shipping commitments,” UPS said in the letter. “If you have a bundled contract, or incentives dependent upon UPS Freight volume, we will ensure you experience no negative financial impact. The UPS Small Package National Master Agreement (NMA) has been ratified. Customers can remain confident UPS is ready to continue to serve its small package customers throughout the holiday season and beyond.”

What’s more, a UPS spokesman told LM that UPS made an offer that the company believes should be ratified.

“It is an offer that rewards our employees with wages and benefits at the top of the industry and compensates them for their contributions to the success of the company,” said UPS spokesman Glenn Zaccara. “We are disappointed that the [UPS] Freight Teamsters union leaders have chosen to announce the potential for a strike, should their members vote ‘no’ on the offer.  The company has now begun discussions with UPS Freight customers to inform them of the potential for service disruption and the need to arrange alternative carriers.  Because we do not have a guarantee against a work stoppage, we cannot afford to put our customers’ volume at risk of being stranded in our system. Therefore, we will work to empty our network of freight by Friday, November 9.

Zaccara added that the UPS Small Package National Master Agreement (NMA) has been ratified and that customers can remain confident UPS is ready to continue to serve its small package customers throughout the holiday season and beyond.

In a research note, Stifel analyst David Ross weighed the risks of these developments for both UPS Freight and shippers.

For UPS Freight, he explained, the risks are fairly straightforward, as a strike would cost money and lose business, while no strike may still cost some business, as the company is reducing the number of pick-ups each days for the next week and a half.

“The reason for the company to slowly halt customer pickups this week and next (turndowns progressively increasing based on length of haul) is so they don't have customers' freight “stranded’ in their network during an uncertain length of time were the union to strike,” wrote Ross.

As for shippers, these leads to a situation where they need to be concerned about what happens to their LTL shipments, adding it is more of a problem for shippers that solely sources with UPS Freight, even though most shippers tend to use multiple carriers.

“Assuming the shipper has a number of contracts in place, it can spread it out over the rest of its carrier base,” Ross noted. “If not, they may have to seek out 3PLs at a higher price. Any way you slice it, shippers won't be spending less money to get their LTL freight moved.”

As for what happens next, Ross pegged the chances of UPS seeing its first labor strike, and the company’s first since 1997, at better than 50%, adding it is not clear how long it may last and that UPS does not want to leave the LTL business. He said that some UPS Freight Teamsters staffers contend UPS does not want to be in the LTL sector, with this contract impasse providing a reason for them to exit it.

“[W]e believe LTL is an important (even if overlooked) part of the UPS portfolio and that shutting it down would give FedEx an offering that UPS does not have,” Ross stated. “And UPS can't have that.”