As expected and predicted, the UPS-Teamsters negotiations have become extremely contentious and heated up over the past week. The union and UPS had both reported that they had reached tentative agreement on non-economic issues. However, there is no surprise that talks related to wages and benefits would bring the negotiations to a screeching halt. The two sides were so far apart that on 06/28, Teamsters General President Sean M. O’Brien stated that “The Largest single-employer strike in American history now appears inevitable.”

Thankfully, since this comment was made there has been some positive movement on key economic issues. It appears that UPS has made some major concessions within the last 48 hours, that have gotten the negotiations back on track.
The Latest Since Our Last Reporting

The Teamsters had walked away from the negotiating table due to UPS providing what they called “an appalling economic counterproposal.” At that time, neither side had released the details of the UPS proposal. However, since then, there have been reports that details of the proposal had been leaked to various social media sites.

We dug into this and found the following information, which allegedly provides details of the UPS Financial offer to the Teamsters. Once again, neither UPS nor the Teamsters have confirmed that this is accurate. However, the details seem to be realistic and believable based on what we would expect UPS to provide in an initial offer. 

According to the communications that we reviewed, the UPS offer included language that would greatly increase the current two tier driver classification (referred to UPS and the Teamsters as the 22.4 tier system), that the Teamsters are actively opposed to. The Teamsters have demanded that UPS eliminate this two tiered system was put in place in the last UPS-Teamster contract. This system had created a lower paid driver classification. These 22.4 drivers split their time between making deliveries and working inside UPS facilities. 

In this alleged offer, it appears that UPS was seeking to develop another tier of Drivers that would be paid even less than current 22.4 drivers. Wage progression would have been tied to two classes of “legacy” workers, those making more and those making less than $20 per hour, and a third tier of new workers hired after the start of the contract on August 1. For both “legacy” categories, general wage increases would have been 14% over 5 years. 

Under the proposal, the 22.4 category would be eliminated and all current hybrid drivers would become Regular Package Car Drivers (which is what the Teamsters had been demanding). However, the progression for all new full-time drivers, (as well as most other non- “inside” categories) would be capped at $32 an hour. This is far below even the current top rate for 22.4 drivers, effectively replacing them with an even lower-paid third tier.

The offer also showed minimal wage increases for Part Timers. It showed a four-year wage progression, starting at $17 and ending at $21 an hour. This proposal would save the company huge amounts of money because the existing/ extremely high turnover rate means that most workers will never stay long enough to reach the top rate.

If this leaked proposal was indeed accurate, no one should be surprised that the Teamsters walked away from negotiations. However, the Teamsters did agree to return to the negotiating table on Friday June 30th.  The Teamsters reported that “under extraordinary pressure from the Teamsters to deliver a strong contract- UPS gave the union a revised counterproposal with significant movement on wages and other economic language.

An Ultimatum by July 5th 

Teamster leadership also provided an ultimatum, stating that UPS needs to provide their last, best, final offer by July 5th, or they will risk a strike after July 31st. The Teamsters have indicated that they need this offer now, in order to allow them time to put the proposed contract forward for its members to ratify before the agreement expiration. 

Following a full day of negotiations on Friday, the Teamsters reported that they had reached tentative agreement with UPS on three major economic issues, “tearing down the 22.4 two-tier wage system, establishing Martin Luther King, Jr Day as a full holiday for the first time, and ending forced overtime on drivers’ days off. 

On Saturday, July 1st– Teamster General President Sean O’Brien held a press conference outside Teamsters headquarters to provide an update on negotiations. During his fiery address, he continued to tout the union’s intent to ensure that all UPS Teamsters are rewarded for efforts that they put forth during the Pandemic, which lead to record level profits for UPS. 

He also stressed that this contract will be used to help strengthen the labor movement in the US. O’ Brien commented that UPS now has the opportunity to be a role model to other companies, and demonstrate what it means to be a good employer, and to reward the people that have made them successful. He acknowledged the fact that UPS drivers are well compensated. However, he also pointed out that a majority of UPS workers are Part Timers who do not earn wages that can sustain a family in the US.

No Concessions for Teamsters So Far

He also stated that all gains made so far, have been accomplished without the Teamsters making any concessions. O’Brien also stressed that the Teamsters will not make any concessions as talks continue. He also said that UPS can “continue to be loyal to Wall Street, and forget about Main St.” However, he warned that this approach would create devastating effects for UPS. He stated that if UPS is not willing to give into the demand of the Teamsters, then “… UPS is making a choice to strike themselves, where we will put 340,000 strong Teamsters on the streets until we get what we want.“ 

On Sunday, the Teamsters indicated that they continued concentrating on economic priorities. Sean O’Brien stated, “The company knows our deadline, and they’ve pledged to meet it. UPS has 60 hours to do the right thing and get a deal done….” He went on to say that “UPS has been given enough warnings at this point. They know what’s waiting for them if they drop the ball on the one-yard line.”

Based on what we have seen and heard so far, it is our opinion that UPS will try to be loyal to Wall St., AND Main St.! Our prediction is that in the near future, we will hear from the Teamsters that UPS has presented them with an historic contract that will reward their members for all of the hard work and sacrifices that their members have made. UPS will then announce that they have been successful in establishing a Win-Win-Win agreement (Win for Teamsters, Customers, and Company). 

It is obvious that the Teamsters will win by receiving the strongest contract that they ever have had. UPS will win by avoiding a costly work stoppage, and will improve their image as a responsible company that rewards their workers. Customers will win by avoiding a work stoppage that could cripple their businesses. UPS will probably also spin this by stating that customers will continue to enjoy the high quality of service that UPS provides through their solid contract with the Teamsters. 

But what about the cost of all this? After all, someone is going to have to pay for the increased costs that will be associated with this new agreement. If the Teamsters are not making any concessions, the end result is going to be a pure cost increase for UPS. So, if UPS is going to try to please Wall St., and Main St., the only place they will have to turn is YOUR Street. 

What This All Means For You

It is important to note that this will not only impact UPS customers. FedEx has historically matched UPS rate increases, and one can expect them to continue to take advantage of the opportunity to improve their margins. Also, the Teamsters will continue to put pressure on Amazon, which will inevitably cause them to increase compensation to their workers. The bottom line is that no one is immune from the impacts of a new UPS-Teamster agreement. 

So, we will continue to stress the need to start planning for major increases that are sure to come. We welcome the opportunity to meet with you to help you begin building a strategy that will help you protect your bottom line. Please reach out to us today to schedule a free Cost Control Strategy consultation. 

The UPS Teamster official countdown clock read 42 Days, 13 hours and 58 minutes until the expiration of their contract with UPS, at the time that we started to write this article. It has been well publicized that the Teamsters intend to strike if an agreement is not reached by midnight of July 31st, 2023. Based on the information that has been released by both sides, there still appears to be a long way to go. There are some major issues that have yet to be addressed.

On 06/13/23, UPS provided an update on their website that announced that UPS and the Teamsters had reached an agreement related to Heat Safety. This is one of the main issues that the Teamsters had brought to the negotiating table. Teamster leadership had made a similar announcement to their membership ranks the day before. 

This should not come as a surprise to anyone, given the bad press that UPS received last summer when a UPS Driver in California died from Heat Stroke while out on his route. Following this incident, there was a flurry of news stories and articles that came out, which shed a light on the challenges that UPS Drivers faced due to the heat and lack of cooling systems in UPS vehicles. 

So, at the end of the day, one would not expect agreement on this issue to be too difficult. It was pretty obvious that this needed to be fixed!  According to announcements made by UPS and the Teamsters, there will be fans installed in all delivery vehicles immediately following contract ratification. Additionally, UPS has committed to equip all newly purchased U.S. small package delivery vehicles with air conditioning starting January 1, 2024.

Other news coming from these negotiations that came as no surprise was that the Teamsters overwhelmingly approved their strike authorization. This is a process that unions often use to build leverage in the negotiations.  A strike authorization vote does not necessarily mean a strike is imminent, but is a way for a union to add pressure and send a message that membership is willing to strike if negotiations are not met. 

There was no doubt that UPS Teamster membership would  vote “Yes” to authorize a strike.  Before the vote was finalized the UPS website stated that “…the Teamsters asked their UPS members to participate in a strike authorization vote—a routine part of the bargaining process—which voting members will overwhelmingly approve. “

So, now we have begun to see news releases made by the Teamsters that hype their unity and memberships willingness to strike. Once again, designed to create leverage in the process. The sad thing about this process is that besides creating leverage against the company, it also creates more anxiety for shippers. There are many companies that will see the press about the approval of a Strike by UPS Teamsters, and will misinterpret the news. 

Some may think that this means that there is going to be a strike. Others might see this as a sign that things are not going well in the negotiations, and cause them to consider moving volume away from UPS. So, this process could just lead to more volume bleed for UPS. Packages will move to non-union carriers, and may never come back. 

Although there has not been any agreement on major economic issues, The Teamsters and UPS have both expressed satisfaction with progress being made in the negotiations. Teamster General President Sean M. O’Brien said that “We’re up to 43 total non-economic changes that have already been made to the UPS Teamsters National Master Agreement. This is an extraordinary number of tentative agreements reached and language changed at this stage of negotiations.” The UPS website has also indicated satisfaction with progress being made. 

But to us, the 800 lbs. Gorilla in the room is the main economic elements of the negotiations. It appears that there have not been any discussions related to wages/ benefits, or the two tiered driver classifications that the Teamsters are strongly opposed to. Both of these items could be extremely costly for UPS. 

The Teamsters have stated over and over again, that they expect to benefit from the record profits that UPS has seen in recent years. So, what will they be expecting in the form of wage and benefit increases? Will they expect UPS to fully eliminate the two tiered Driver classification scenario? The Teamsters have also stated that they will not agree to any concessions in these negotiations, and are claiming that they have not done so up until this point. 

Given this, one should expect that the Teamsters will be seeking record level wage increases to be in line with the record profits that UPS has seen. Based on the Teamsters approach to these negotiations, there will likely be some serious demands made, with no give backs. So, the discussion over the coming days and weeks will be the most difficult by far. Far more difficult than the issues that have been settled. 

At the end of the day, UPS may be forced to agree to the largest wage increases they have ever awarded. On top of this, UPS has agreed to many issues that will be costly for them (Air Conditioning and Fans in package cars etc.)  The unfortunate part of this, is that the ones most likely impacted by this will be the shipper. 

The UPS GRI was the highest that it’s ever been this year at 6.9%. With all of the added expense that UPS is going to incur, it is possible that shippers should be prepared for more records to be broken. Of course UPS can try to offset the cost of higher wages through the use of technology and automation. However, this can be costly also, especially in the short term. On top of this, UPS has already agreed to increased scrutiny on the use of technology. 

One of the new agreements states that UPS would be required to negotiate with the Teamsters at least 45 days before it introduces certain technology such as drones, driverless vehicles etc. The Teamsters are actively opposed to any technology that is going to eliminate Teamster jobs. So, this will make it harder for UPS to find ways to reduce costs. This means only one thing- higher rates!

So, I think we can all see where this is going. We cannot stress enough the importance of planning for the large increases that are sure to come. Failure to gain control of these spiraling costs will have a major impact on bottom lines. Don’t wait until it’s too late. Give us a call now to get ahead of the record level rate increases that we are predicting for 2024!