UPS’s Union Rejects Labor Contract, Raising Risk of Strike

(Bloomberg) -- United Parcel Service Inc.’s union voted down a five-year labor contract, sending the company and labor leaders back to the bargaining table and potentially opening the door to a strike.

The contract, which covers about 250,000 drivers and sorting-center workers, was opposed by 54 percent of the votes cast, the International Brotherhood of Teamsters said in a live webcast of the count late Friday. The rejection is a blow to UPS as it seeks to keep costs competitive with nonunion rivals, including FedEx Corp. and regional package companies. Even Amazon.com Inc., a large customer for UPS, is starting its own delivery service.

Opponents of the main contract balked at a $13-per-hour starting wage for part-timers, $2 short of what some workers demanded. They were also unhappy with the creation of a new hybrid class of weekend driver that loads packages and earns less than current parcel drivers. Turnout was 44 percent.

“You would create a permanent underclass of drivers who are paid less money and have fewer rights to do the same job,” said David Levin, a leader at the Teamsters for a Democratic Union, which opposes current union leader Jim Hoffa.

Another sore point: Many union members believed that issues surrounding harassment and excessive overtime “just haven’t been addressed,’’ Levin said before Friday’s results.

Strike Pre-Approved

The last time UPS workers went on strike was in 1997 and the 15-day walkout cost the company about $800 million of revenue. The union already has authorization from its members to set a date for a work stoppage.

Such a drastic labor action is still unlikely, or at worst is months away, Helane Becker, an analyst with Cowen & Co., said before Friday’s results. The first task for union leaders is to poll members to understand why the agreement failed, and to then resume bargaining with the company. The two sides could agree to continue operations while a revised contract is hammered out, Becker said.

A labor conflict would cripple UPS and the entire industry. A strike could shave half a percentage point from economic growth if it becomes widespread and prolonged, she said. FedEx, the U.S. Postal Service and other carriers would be hard-pressed to pick up the slack. Customers probably would have to fetch their own packages from central pickup points.

UPS commands 44 percent of the U.S. parcel package market by revenue, ahead of the post office with 29 percent and FedEx with 27 percent, according to Berenberg market analysts. Revenue for the industry is forecast to jump 40 percent from 2017 to 2022, UPS has said.

Wage Increases

Workers rejected an agreement that would have boosted parcel-driver wages to more than $40 an hour by 2022 and raised the part-time starting wage to $13 an hour from about $10, the biggest increase in more than three decades. That part-time starting wage would rise gradually to $15.50 by 2022. Union leaders said the new hybrid drivers would allow regular drivers to avoid weekend duty, and the number of the new positions was capped at 25 percent of the parcel-driver workforce.

Opponents object to the new class of weekend drivers because they will be paid less, creating a potential split in the union. The top wage for the hybrid loader/drivers will max out at about $37 by 2022.

“This hybrid position is just a raw deal any way you slice it,’’ Nick Perry, a UPS parcel driver based in Ohio, said before Friday’s results.

The popularity of the Hoffa-led Teamsters leadership has waned. In a 2016 general election, Hoffa barely beat back a challenge from Fred Zuckerman for union president. Zuckerman and the Teamsters for a Democratic Union were vocal critics of the agreement.

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