UPS and Teamsters reach tentative deal to avert strike

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United Parcel Service (UPS) and the International Brotherhood of Teamsters reached a tentative new five-year collective bargaining agreement covering more than 300,000 delivery and warehouse workers.

The agreement, if finalized by a vote of union members, would avert the largest single strike against a company in US history and an estimated $7 billion hit to the US economy.

The union's current contract with the delivery giant expires Aug. 1, and the Teamsters threatened that drivers would walk off the job without a deal.

Talks between the two sides restarted today after stalling earlier in the month. The deal still needs to be ratified by rank-and-file members in a vote that will conclude on Aug. 22.

"The strike threat was real and significant," said John Haber, strategic channel partner at Transportation Insight. "If the strike had gone ahead the repercussions would have been felt across the industry."

UPS trucks are shown in San Francisco, Tuesday, July 11, 2023. (AP Photo/Jeff Chiu)
UPS trucks in San Francisco. (AP Photo/Jeff Chiu) (ASSOCIATED PRESS)

Part-time pay

Pay for part-time employees had been a big sticking point between the two sides before today's tentative agreement. The group comprises more than half of the company’s workforce.

Their pay would rise by $2.75 per hour in 2023 and $7.50 per hour over the length of the contract, according to the Teamsters.

Existing part-time workers would earn at least $21 per hour immediately, and new part-time hires will start at that same rate, according to the union. Part-time workers currently make a minimum of $16.20 per hour and average $20 an hour after 30 days on the job.

The deal also increases pay for full-time workers who currently make $42 an hour. They also will get a bump of $2.75 more per hour in 2023 and $7.50 per hour over the length of the contract.

Teamsters general president Sean O’Brien said the union made no concession to reach the accord, which he said is worth $30 billion and covers more than 340,000 workers. The company says the pact covers 330,000 employees.

"This contract sets a new standard in the labor movement and raises the bar for all workers," O'Brien said in a statement.

A UPS spokesperson described the agreement as a "win, win, win" in an email to Yahoo Finance. The company added that it will update its guidance concerning the agreement, including its projected cost, during its second quarter earnings call on Aug. 8.

"This agreement continues to reward UPS’s full- and part-time employees with industry-leading pay and benefits while retaining the flexibility we need to stay competitive, serve our customers and keep our business strong," UPS CEO Carol Tomé said.

UPS CEO Carol Tome is shown speaking at a podium.
UPS CEO Carol Tomé. REUTERS/Jonathan Ernst (Jonathan Ernst / reuters)

The danger posed by a strike

A strike threatened to upend the US supply chain, add to inflationary pressures, and possibly push loyal UPS customers to competitors such as FedEx (FDX), Amazon (AMZN), and the United States Postal Service.

UPS currently handles 22 million domestic packages a day. It was responsible for delivering 24.5% of all US parcels in 2022, according to Pitney Bowes. Only the Postal Service handled more.

The company said its daily deliveries account for roughly 5%-6% of US gross domestic product (GDP). Teamsters Union president Sean O’Brien said at a rally Saturday that the deliveries represented 7% of GDP.

The last UPS strike was in 1997, when roughly 185,000 workers walked out. At the time UPS handled fewer packages per day but was responsible for more total industry traffic.

That work stoppage lasted for 15 days and cost UPS hundreds of millions of dollars. The company eventually made concessions on pay, pensions, and part-time workers.

Sean M. O'Brien, Teamsters General President, talks with UPS teamsters and workers before a rally Friday, July 21, 2023, in Atlanta, as a national strike deadline nears. The Teamsters said Friday that they will resume contract negotiations with UPS, marking an end to a stalemate that began two weeks ago when both sides walked away from talks while blaming each other. (AP Photo/Brynn Anderson)
Sean M. O'Brien, general president of the International Brotherhood of Teamsters. (AP Photo/Brynn Anderson) (ASSOCIATED PRESS)

Before today the two sides had been able to settle a number of other issues, including ending forced overtime on unscheduled days, air conditioning for new delivery cabs, disabling inward-facing delivery vehicle cameras, more full-time positions, and more hours for seasonal part-time workers.

The union and UPS also agreed to eliminate a pay class for a hybrid group of full-time workers who sort and load packages in the company's warehouses as well as drive and deliver packages.

This group was formed in a mutual agreement between UPS and the union to meet demands for Saturday delivery.

Those workers who work Tuesday through Saturday and earn $36.54 per hour plus benefits will convert to regular full-time workers, though their pay rate has not yet been disclosed by the parties.

"We demanded the best contract in the history of UPS, and we got it," O'Brien said.

Alexis Keenan is a legal reporter for Yahoo Finance. Follow Alexis on Twitter @alexiskweed.

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