CSCMP's Supply Chain Quarterly
November 18, 2018
Forward Thinking

What can 83 cents an hour buy you? A UPS-Teamster contract

Proposed 5-year pact raises full-timers' pay by 83 cents an hour per year.

Will 83 cents move the needle for more than a quarter of a million UPS Teamsters?

That is the annualized hourly wage increase, spread out over 5 years, that full-time unionized UPS workers would receive if Teamster members ratify a tentative contract agreed to last Thursday by the company and union leaders. The proposal calls for full-time hourly wages to rise by $4.15 an hour over the life of the contract, which would take effect Aug. 1 and run through the end of July 2023. Full-timers would thus receive an 83 cents-an-hour wage hike on each contract anniversary date.

For UPS full-timers, the proposed language works out to a 2.2 percent annualized wage hike, increases that Ken Paff, national organizer and chief spokesman of the dissident group Teamsters for a Democratic Union (TDU), are the smallest he can remember ever being agreed to.

By the end of the contract period, wages of UPS full-timers would reach about $40 an hour, according to TDU calculations. TDU, which is typically at odds with Teamster leadership, is taking a skeptical view of the compact's merits. The Teamsters represent 256,000 UPS small-package employees and another 11,000 at the company's UPS Freight less-than-truckload (LTL) unit. Talks are continuing to hammer out a separate contract covering LTL workers.

Atlanta-based UPS has always faced labor cost headwinds because of its unionized status. Its main rival, Memphis-based FedEx Corp., uses independent, non-union contractors for its ground parcel delivery operations. In recent years, however, pressures to drive down costs have intensified as providers that offer ostensibly free shipping to their customers look to shave delivery expenses. This was not mainstream thinking in 2013, the last year UPS and the Teamsters negotiated a contract.

The two sides will meet July 9-12 in Minneapolis to continue the LTL talks and to finalize the local parcel supplements and riders that remain unresolved and must eventually be approved before the national, or "master," contract goes into effect. Once the local agreements are hammered out, two-person committees at each local will review the proposed master contract. It will then be sent to the rank and file for a ratification vote. A rank-and-file vote, which for the first time in the history of UPS-Teamster contracts will be conducted electronically, will likely not be held until August.

The tentative agreement establishes a classification of a full-time "combination driver" who will receive $20.50 an hour as a starting wage and max out at $34.79 an hour by Aug. 1, 2022. It also calls for UPS, one of the largest users of intermodal services operated by the railroads, to shift a significant amount of volume from intermodal to an expanded network of two-person sleeper team drivers. The Teamsters said that the shift will create about 2,000 full-time team drivers, and that UPS team drivers will make more than any other commercial driver. Denis Taylor, head of the Teamsters' package division, called the proposal one of the best contracts ever negotiated for UPS workers.

Sleeper teams are in strong demand as heightened delivery requirements compel fleets to keep the wheels constantly turning. Sleepers, which allow one driver to operate while the other sleeps, is seen as a way to offset the impact of the recent federal Electronic Logging Device (ELD) mandate, which requires drivers to strictly follow the federal Hours of Service guidelines and which would shut a solo driver down after 11 hours behind the wheel.

Earlier this month, Central Oregon Truck Co., a Redmond, Ore.-based flatbed carrier that has typically paid its solo drivers at the high end of the wage scale, launched a team driver pay program that will pay combined annual wages of between $122,000 and $173,000. Central Oregon has slightly more than 300 trucks.

Mark Solomon is executive editor—news at DC Velocity, a sister publication of CSCMP's Supply Chain Quarterly.

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