UPS and the Teamsters prepare for high-stakes talks with union contract set to expire

With United Parcel Service’s labor negotiations approaching, CEO Carol Tomé sounded confident on this week’s fourth-quarter earnings call that a “win-win-win” agreement would be reached before the end of July.

But Tomé’s optimism comes as the Teamsters union, which represents more than 340,000 UPS workers, amps up pressure on the delivery giant.

“There have been a lot of articles and headlines that might cause someone to question whether or not a win-win-win is achievable,” Tomé said Tuesday on the call, acknowledging talk of tougher negotiations.

The Teamsters publicly pledged to launch a strike if a satisfactory contract is not reached. “Whether there is a strike of UPS workers is up to UPS,” said Kara Deniz, a spokesperson for the Teamsters.

The talks start in April, with the current national contract set to expire on July 31. Negotiations for local contracts begin this month.

A strike could do substantial damage to UPS operations, and create problems for businesses and consumers alike. In the fourth quarter of 2022, UPS workers delivered a global average of 28 million packages per day, according to the company’s website.

Even with the rumblings about a potential strike, Tomé is maintaining a positive outlook given that unionized workers “have been a part of the UPS family for more than 100 years.”

“This is not our first rodeo,” she said.

But this year’s talks will be different.

What to expect

Since UPS and the Teamsters last negotiated a contract in 2018, the world has been through a global pandemic that workers say has worsened UPS working conditions. The union itself has found new, more aggressive leadership, at that.

For the first time, Teamsters Union President Sean O’Brien and the union’s secretary of the treasury will have seats at the bargaining table and be directly involved in negotiating the terms of the new contract.

O’Brien took the helm of the union in March 2022 with an ambitious agenda and a radical attitude relative to his more moderate predecessor, James Hoffa.

“We are sending a message to UPS that the days of concessions and walking all over our members are over,” O’Brien said Aug. 1, when the union kicked off its national campaign in advance of negotiations.

The tough approach comes in the wake of the Covid pandemic e-commerce boom that fed a spike in UPS shipping volumes, generating high profits for the company and tougher working conditions for its employees, the union has said.

At the bargaining table, the Teamsters are looking to secure higher wages, more manageable work shifts and improved safety conditions. It wants to tone down employee surveillance practices like, for instance, getting rid of the ring cameras installed in most trucks.

Plus, after a slew of heatwaves, the Teamsters are calling for improved safety measures inside the company’s trademark brown trucks and warehouses. Over the summer, UPS drivers took to social media to post thermometer reads from inside their trucks, which often neared 120 degrees.

“There can be no dispute sadly that the earth is heating up and that puts an uncomfortable situation on our employees at the peaks of the summer,” Tomé said on the earnings call. She explained that even before negotiations begin, the company was planning to bring in new technology and hydration measures to keep workers safe in dangerous heat.

Teamsters also want to eliminate the “22.4” employee classification, which refers to workers who often work full-time hours but are officially considered hybrid and, as a result, are paid less. In general, the union is aiming to expand the number of full-time positions and put an end to subcontracting.

The union agenda also includes more manageable worker schedules after the Covid-era shipping spike forced many to have to work a sixth day on the weekend – what the union has coined “the sixth-day punch.”

“There are some drivers who leave while their kids are sleeping and when they come back at night, the child is back in bed. [Those drivers] lose the entire day working,” said Deniz, the Teamsters spokesperson.

The ‘bumpy year’ ahead

The pandemic shipping boom has since eased, and UPS is now navigating how to stay profitable while volumes sag.

CFO Brian Newman said he expects 2023 to be a “bumpy year,” as macroeconomic challenges like higher interest rates and inflation continue to drive up the company’s costs and weigh on demand. UPS estimates that 56% of its profit will come in during the second half of the year on the bet that loosening Covid restrictions in China will help revive the company’s international market.

Given these headwinds, UPS’ path forward looks centered around cutting costs and raising prices. The company said it would reel back capital expenditures to $5.3 billion, down from the initial $5.5 billion plan they started fiscal 2022 with, focusing on leasing rather than buying some of its locations. UPS also raised shipping rates by 6.9% in December 2022.

But as UPS tries to rein in costs, the question of higher wages and other labor investments still lingers.

“When you see something like [Tuesday’s earnings] where there were cloudy projections, well, what you also saw was $8.6 billion in dividends and buybacks,” said Deniz.

“Our members know what this company makes. They know the finances of this company and they know that they are what makes this company money,” Deniz added. “They want their share of the profitability.”

Despite the long list of union demands, Tomé assured analysts on the Tuesday earnings call that the company and the Teamsters are “aligned.”

“With just a few tweaks to our existing contract,” she said, “we can work this out.”