FedEx Labor Status Blurs

Man, a lot happened while I was on vacation!

On Friday, June 29th, The House Transportation and Infrastructure Committee amended a major FAA funding bill with the inclusion of the "Express Carrier Employee Protection" Act. The amendment would allow FedEx Express drivers and mechanics to organize under the National Labor Relations Act (NLRA) . They are presently covered by the Railway Labor Act (RLA). Under RLA, union organization must take place at the national level, not at local levels, thus making union organization much more difficult. FedEx successfully lobbied in 1996 to retain its status as an airline, thus making union (Teamsters) organization at FedEx very hard.  The RLA makes organizing particularly hard within airlines and railroads in order to prevent strikes which might otherwise harm domestic commerce and society as a whole.   (that's the theory anyway)

FedEx has traditionally argued that its workers should be covered under RLA since FedEx has maintained that it is primarily an airline, not a surface transportation provider.   However, since FedEx purchased Caliber Systems, Inc. RPS division in 1998, its FedEx Ground unit has been a driving force for both business growth and profit, especially in the e-fulfillment and retail spaces. FedEx Ground and FedEx Express in combination allow FedEx to compete head up with UPS in all modes. UPS is said to be a proponent of FedEx coverage under NLRA as it would narrow the cost basis difference between these two parcel competitors. 

UPS is the largest Teamster driver organization in the US. The UPS contract with the Teamsters is due to expire in 2008 and is currently being renegotiated.  Bringing FedEx in on the side of the Teamsters would strengthen their position considerably in future negotiations as there would be fewer outlets for available freight should the union decide to strike. 

Passage of the FAA Bill with the Express Carrier Employee amendment intact might one day lead to restructuring at FedEx that would more closely integrate their business units though analysts may fear a short term hit to FDX stock.   FedEx Ground and FedEx Express operate as separate entities today.

There are "Miles to Go" yet on this.

While the Teamsters, the AFL-CIO and other unions have vigorously praised the action of the House Transportation Committee, the The FAA Bill amendment does not signal conclusion to the RLA/NLRA discussion. The amendment is now part of a massive four-year Federal Aviation Administration reauthorization bill totaling $50.2 billion for FAA operations, facilities and equipment and $15.8 billion to modernize the US air traffic control system. The bill faces well organized opposition in both the House and Senate in addition to a possible veto from President Bush. The FAA bill already contains a number of contentious points including some involving Air Traffic Controllers, which the President has said he would veto.

This is a space worth watching.  Also check out a previous article on upcoming important union contract negotiations.

Eric

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Comments

[Richard Palarea, COO]

I find it most ironic that the strategic selling gaps FDX has always used to position themselves in a different light than UPS are closing. This is one of the last frontiers that the FDX reps will tout whenever I bring them to the table for a client bid - "we're not union, so you don't need to worry about a strike as you would with UPS - did you factor that into your decision?"

The selling differentiators have fallen one by one. You put it well, Eric, that there is still a long way to go. There are real differentiators that still exists. I wonder if corporate will be able to determine what those are, distill them well and send them down to the field ...and I wonder if the field will be able to integrate them into their new thinking.

[Eric]

Bob you ask some good questions. I dont have the answers to some, but can give some opinions.

FedEx contract drivers I think are independent businessmen. They bid and own their routes. I also think the only place FedEx uses contractors is on their FedEx Home delivery product. (I may be wrong on that.) The unions could organize these guys, but as independent businesses, Im not sure theres any benefit.

DHL also uses independent contractors, but those drivers tend to work for small companies who bid on routes. Those drivers do not work for DHL directly. DHL does however employ teamster drivers in stations where they use company drivers. DHL is a signatory to the teamster national master contract.

I have no idea on the pension issue and how that will play out.

I also have no opinion on when and whether any of this will ever hit the courts. Unless congress changes the laws, as far as I know, using independent contractors is perfectly legal unless somebody tried to take work from the union and give it to a non-union labor force.

Eric

[Bob Stephens]

Eric,
As a retired UPSer I can be considered bias but I agree strongly that FEDEX is competes in the same market and should fall under the same regulations.

There do seem to be alot of premature celebrations among Teamsters and your observation that there are still miles to go is well noted.

I would like your opinion on a few other issues, however.

This change will not affect FEDEX's relationship vis a vis their contract drivers. Is that true?

FEDEX is not the only company using the contract driver business model. Do you see any reason the courts will disallow these agreements?

Lastly, there is a remote possibility FEDEX employees might choose an alternative union to the Teamsters given the opportunity. How will be the current UPS negoiations concerning pensions play into that?

[Eric]

The impact on the industry will be huge. It will change the cost basis at FedEx and could impact competitive rates. It certainly would strengthen the Teamsters negotiating ability when dealing with carrier employers. Not just the parcel industry would be impacted either. ALL Teamster employers would be impacted.

Should this amendment become law, it will be interesting to also see how FedEx deals with the pension plans. Will they set up an individual pension plan for their union drivers, or contribute to a common plan?

Lots of downstream ramifications for everybody. Thats why I wrote about this.

Eric

[John Craig]

This is a story worth watching. If the amendment survives, the impact on FedEx will be huge.