Mr. Smith takes on Washington

FedEx Corp. Chairman Frederick W. Smith hates being outflanked on Capitol Hill, especially when it comes to labor issues. So when the House of Representatives on May 21 approved a funding bill for the Federal Aviation Administration that contained language making it easier for unions to organize workers at FedEx's express unit, Smith fired back.

An online campaign called "Brown Bailout" was rolled out June 9 warning of the dire consequences of bringing FedEx's express operations under the jurisdiction of the National Labor Relations Act (NLRA)—the same law that covers arch-rival United Parcel Service (UPS)—instead of the Railway Labor Act (RLA) that today covers FedEx Express employees. A change in labor classification could result in a "hidden package tax" of more than $5 billion and deprive businesses of rush deliveries and consumers of needed medicines, among other potential disruptions, FedEx said.

Statements on the site accuse UPS, which actively lobbied for the language, of seeking what amounts to a government bailout instead of fairly competing for business with FedEx.

Under the House legislation, employees of an "express carrier" can be covered under the RLA, a 1926 law that governs labor-management relations in the airline and rail industries, only if the employees are pilots and mechanics, and perform the type of work governed under that law.

The language was introduced by Rep. James L. Oberstar (D-Minn.), chairman of the House Transportation and Infrastructure Committee. Oberstar said in a statement that it would "remove the disparity in current law" between the express operations of FedEx and UPS. The bill now moves to the Senate for consideration.

The RLA requires that workers at a company be organized as a single unit. By contrast, the NLRA permits workers to be organized at a local, terminal-by-terminal level and is considered a much easier path to unionization than the RLA.

On its Web site, FedEx warned that representation under the NLRA would give unions the power to call job actions within a city or a region, creating a ripple effect across the FedEx network and leading to delays of time-sensitive deliveries to and from the affected area.

UPS spokesman Malcolm Berkley said FedEx Express is the only company in U.S. transportation whose drivers, sorters, and loaders are covered by a labor law designed for airline workers instead of ground-service employees. "We think that if you do the same work, you should be covered under the same law," he said.

FedEx has been virtually non-union since its founding in 1972, with only its pilots today represented by organized labor. FedEx already has more than 100,000 non-airline employees who are eligible to be covered under the NLRA but who remain non-unionized.

Berkley says FedEx's campaign is based on a "bogus premise" that a change in union classification will trigger a dramatic shift in FedEx's labor structure, affect its operations, and drive up its labor costs. Berkley notes that thousands of FedEx employees who for decades could have been organized under the NLRA have chosen not to be represented by organized labor.

Nevertheless, the issue has become one of Smith's hot buttons. And the honcho known for his political acumen and penchant for hardball has already rolled up his sleeves on this one. For instance, in testimony earlier this year before Congress and in government filings, FedEx said that future orders of Boeing 777 freighters would be conditioned upon its workers remaining governed under the RLA.

In April, a parcel executive with deep knowledge of FedEx summed up FedEx's position succinctly: "Fred is royally pissed about this one. And you know what can happen when he gets royally pissed."