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.
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