UPS, Teamster leaders reach tentative agreement on five-year labor contracts

UPS Inc. and leaders of the Teamsters Union late last night reached tentative five-year labor contracts covering nearly 250,000 unionized employees at UPS and the company's less-than-truckload (LTL) unit, UPS Freight.

The tentative agreements, which still must be ratified by the rank-and-file, covers about 240,000 Teamster members working in Atlanta-based UPS' small-package operations and another 10,000 to 12,000 union workers at UPS Freight. Combined, it represents the largest collective-bargaining agreement in North America.

In a statement last night, the Teamsters said union representatives from UPS and UPS Freight will soon meet to review the respective agreements. Following that, ballots will be sent to members who will then vote by mail. The results are expected by mid-June, the union said.

The tentative agreements come slightly more than three months before the scheduled July 31 expiration dates of both contracts. If ratified by the members, the new contracts will take effect Aug. 1.

Each side was eager to get the deals done long before their deadlines. The first formal communication over the contracts took place last August, much earlier than it has in the past.

In its statement, the Teamsters said UPS and UPS Freight workers will receive "substantial pay raises," and the company will spend more on its pension and health and welfare contributions. Included in the UPS tentative agreement is a "significant increase" in the starting wage rate for part-time small-package workers, the union said.

The union would not disclose any specifics. DC Velocity reported in late March that the union, which had proposed a five-year contract, sought a $1-per-hour wage increase in each of the contract years and a $1.50-per-hour annual increase from current levels to cover pension and health benefits. The current contract, reached in 2007, calls for a $1 an hour annual increase in the company's contribution benefits.

The union also proposed at the time an increase in part-time starting pay to $15 an hour from the current $8.50 an hour.

The tentative agreement requires UPS to create more than 2,000 full-time jobs over the life of the contract by combining part-time positions into full-time slots. First included in the 1997 contract signed after the Teamsters shut down UPS for 15 days that summer with a nationwide strike, the language had required the company to create 20,000 full-time jobs between 1998 and 2008. The Teamsters, and in particular the dissident group Teamsters for a Democratic Union (TDU), have said UPS has not done all it could in the past 15 years to create that many full-time positions.

Under the UPS Freight tentative agreement, workers will make lower co-payments for health insurance, and part-time workers will have the "ability" to become full-timers, according to the Teamster statement. All laid-off UPS Freight road drivers will be put back to work, a provision the union said will settle the issue of management's practice of subcontracting out driving duties. Ken Paff, national organizer for TDU, said in an interview earlier this year that UPS subcontracts about half of UPS Freight's driving duties and subcontracts over-the-road service for the small-package unit, although not as much.

The proposed agreement shifts 140,000 small-package workers to Teamster-controlled health plans from company-sponsored plans, according to the union statement. The move maintains "current strong benefits" for all UPS Teamsters, the union said.

Health care had become a wedge issue during the talks. Ken Hall, head of the Teamsters' small-package division, vowed repeatedly that active unionized UPS employees would not pay anything toward their health insurance premiums.

As of today, there has been no comment on what operational changes, if any, have come from the agreements. Of note is UPS' "SurePost" program, where it tenders parcels to the U.S. Postal Service for "last-mile" delivery from the local post office to mostly residential destinations. The program, designed for e-commerce shipments from online merchants to residences, is an inexpensive way for businesses to reach the largest number of residential addresses with orders for online merchandise. SurePost has gained significant traction since the last UPS-Teamster contract in 2007, mirroring the explosive rise of e-commerce since then.

The post-holiday demand for deliveries to support e-commerce, both in forward and reverse shipping patterns, helped drive solid increases in UPS' first-quarter domestic package volume, revenue, and profit results, the company said when it released its quarterly numbers yesterday.

In January, Hall demanded that UPS propose language that would protect Teamsters jobs in return for the union's continued cooperation with the program. Paff said at the time that much of the work is done by low-paid sorters and loaders who build pallets, each containing hundreds of packages, for delivery by UPS drivers to the closest local post office. Paff said the union doesn't want to end the program but have more of a role in the transportation component of it.

In separate statements, the heads of each group lauded the agreements. "These agreements are a 'win-win-win' for our people, customers, and shareholders," said Scott Davis, UPS chairman and CEO. "The fact that we have reached agreements well before our current contracts expire is a testament to the skills and determination of all those involved in these negotiations."

"These tentative agreements are shining examples to the entire country of a hugely successful company that thrives because of its unionized workers," said James P. Hoffa, Teamster general president.

FLURRY OF ACTIVITY
The announcement caps a busy week for UPS. Besides reporting its quarterly results, the company announced Wednesday that it planned to buy 700 tractors fueled by liquefied natural gas (LNG) over the next 20 months. The vehicles, which run on fuel believed to be 30 to 40 percent cheaper than traditional diesel, will perform local pickups and operate between UPS hubs in 10 states, the company said.

The planned purchase adds to the 112 LNG-powered vehicles UPS already has in its fleet. UPS did not say how much it will spend for the rigs or who will be the manufacturer. Cummins Inc. will supply the engines, according to a UPS spokeswoman.

UPS will also spend $18 million to build LNG refueling stations in Knoxville, Nashville, and Memphis, Tenn., as well as Dallas. UPS already has five LNG refueling facilities in its U.S. network.

On Thursday, UPS said it acquired CEMELOG Zrt, a Hungarian pharmaceutical logistics company, for an undisclosed sum. The transaction, expected to close by the end of June, puts UPS in the Eastern and Central European health care segment for the first time. Up until now, UPS served the region's health care market through its main health care distribution campus in the Netherlands and its own transportation network.

The CEMELOG purchase is the first European health care acquisition UPS has made since late 2011, when it acquired the Italian firm Pieffe.

The acquisition adds 255,000 square feet of health care distribution space to UPS's current European network, the company said. Worldwide, UPS operates 41 health care distribution facilities with 6.4 million square feet of capacity.