UPS, Teamsters reach ‘handshake agreement’ on new five-year labor deal

Shippers fearing a replay of a costly and damaging strike by UPS Teamsters of 20 years ago can exhale. The world’s largest small package company and its approximately 265,000 Teamsters have reached what UPS calls a “handshake agreement” on a five-year labor deal that could pave the way for Sunday deliveries.

The tentative agreement in principle ends months of collective bargaining in a deal subject to ratification. It covers Teamsters-represented UPS employees in small package roles.

Supplemental agreements covering many large locals have yet to be finalized. Once these supplements are resolved there will be a meeting of all local unions known as the “two-person committee” (two officers and/or agents from each local representing UPS) to review the tentative agreement.

Negotiations continue on a separate agreement covering 11,000 Teamsters-represented employees at UPS Freight, the former Overnite operation that is UPS’s LTL freight unit. Those negotiations will continue in Minneapolis, July 9-12, with economics and subcontracting as the main topics.

UPS said its goal was “to reward the company’s employees for their contributions to its success while enabling the business to remain flexible” to meet shippers’ needs.

“Each of these goals has been met in the new agreement,” the company said in a statement. “UPS is well-positioned to grow and meet the needs of its customers.”

Riding an e-commerce boomlet, UPS earned $4.9 billion net income last year on revenue of $65.9 billion, compared with net income of  $3.4 billion on $60.9 billion revenue in 2017.

The new UPS agreement goes into effect Aug. 1, once ratified by employees.

Details of the agreement started to leak out almost immediately after the ink was dry. The Teamsters confirmed the deal would raise the minimum wage for part-time workers from $10 to $13 beginning Aug. 1 and to $15.50 by Aug. 1, 2022. The union had proposed a $15 starting wage for part-timers, so the Teamsters appeared to compromise here.

For full-time UPSers would see pay increases of $4.15 more per hour, spread out over five years, are included in the deal. The union had asked for a $1 per hour raise each year over the five years, so the Teamsters nearly got what they were asking as the typical UPS small package driver will now earn a base salary of just over $40 an hour.

The deal includes a new “hybrid” classification called “full-time combination driver,” who will start at $20.50 per hour with a top rate of $34.79 by the end of the contract, the Teamsters said. That’s about $6 less than regular UPS package drivers will make at the end of the five-year deal. 

The outcome of how many full time jobs will be created out of a section called “22.3 jobs” was not immediately clear. The union had wanted 10,000 new jobs created. UPS said it wanted those new “full-time combination” or hybrid jobs to count toward that 10,000 new jobs level.

“This provision will help to resolve several membership concerns, including Saturday and Sunday delivery, excessive forced overtime, time off, create additional high paying, full-time opportunities for part-time employees and provide thousands of additional contributors to our Teamster pension funds,” the Teamsters said in a statement.

The union said it negotiated what it called “substantial increases” to the employer contributions to the various benefit funds, and increased pension benefits under the part-time UPS Pension Plan and the full-time UPS/IBT Pension Plan. But it did not offer specifics.

“I am confident that once the membership has reviewed and understood the changes, they will see that this agreement is among the very best ever negotiated for UPS members,” Denis Taylor, co-chairman of the Teamsters UPS National Negotiating committee, said in a statement. “I realize that the membership is anxious to see the improvements.”

In a conference call with analysts this week, Federal Express Corp. President and COO Dave Bronczek declined to discuss the specifics of any UPS strike contingency plans.  Asked how much of UPS volume could you accommodate if there is a strike, Bronczek demurred.

“Obviously, it's a timely question,” Bronczek said. “However, we never actually comment about our competitor's issues or their business considerations.”

However, then he added: “I do want to say something that is very important for our customers though. We will continue to provide outstanding service for our customers we have capacity, only then—and only then, if there is additional capacity, if there is a need, would we consider other alternatives for other customers. We will take care of our customers first like we always do, the way we ramp up for Christmas peaks and so forth. We can handle it and we're going to take care of our customers.”

Those contingencies presumably have evaporated at UPS’s chief rival in the wake of the tentative labor deal.

Scott Group, trucking analyst at Wolfe Research, had called this UPS contract negotiations crucial to UPS for flexibility in handing the burgeoning e-commerce sector.

“This is a really important labor contract for UPS to get right if it wants to start leveraging strong e-commerce growth,” Group said recently, adding that UPS needs “significantly more” labor flexibility. It appears to have won at least that in this deal.