What is the UPS National Master Agreement?
The UPS National Master Agreement is a labor contract between United Parcel Service, Inc. ("UPS") and the International Brotherhood of Teamsters ("IBT") governing pay, hours, benefits, and other terms and conditions for thousands of UPS employees working in the United States. The agreement covers approximately 260,000 US based drivers, sorters, porters, clerks, and mechanics across all of the nearly 60 local union affiliates in 50 states.
The UPS-National Master Agreement represents the result of decades of collective bargaining between the IBT and the most powerful private employer in the world. The agreement serves as the foundation for specific shorter consecutive local labor agreements between the IBT and each local union that further govern the manner in which UPS business will be carried out in that specific location. Through the years the agreement has set the standard for service and pay for workers in the parcel delivery industry and allows the Teamsters to interact meaningfully with every major parcel , freight, and package courier service in the United States.
The most recent version of the agreement is the result of years of bargaining and negotiation between the IBT and UPS. Negotiations began in April 2018 and ended with tentative final ratification on August 10, 2018.
The agreement is negotiated roughly every five years and covers the vast majority of Teamsters at UPS. Negotiations take place on the national level but allow for the inclusion of some local provisions where necessary.
Key Terms of the Agreement
The UPS National Master Agreement is a comprehensive document that codifies the various understandings reached between the United Parcel Service and the Teamsters. Among the most significant provisions are the scheduled wage increases for full-time and part-time employees, the allocation of health benefits payments to pension and health funds, seniority selection procedures, work rules, and retiree privileges.
The agreement stipulates that the wage increases will be implemented in May 1997 for full-timers, and August 1997 for part-timers. They will continue in three additional installments, one in 1998, one in 1999, and one in 2001.
The agreement provides that as of July 1, 1997, full-time employees must be paid "Union Health & Welfare Fund" contributions in order to cover the premium cost of their comprehensive health care. Federal government gives special tax breaks to such funds. The contributions go to the various Teamster locals who then pay the health care premiums. The Fund is under the supervision of the Teamster International Union. The employees’ cost of living increases are added to their base rate; those increases are then applied to their base rate before the contribution deduction is made. The same procedure applies to part-timers’ cost of living increases, with the exception that their health care contribution is 25% of the increase.
Neither full-time nor part-time employees will be able to receive health benefits from other plans. Previously, part-timers could elect to opt out of Teamster health plans, if they were covered under their spouse’s plan. This provision is eliminated entirely from the new agreement. The general freight employees in Southern trenches have been receiving their respective pensions from the Central States Pension Fund. Each local U.S. Teamsters’ shop steward controlled their members’ pension funds. The new policy requires UPS to establish a separate pension trust fund for the Southern trench Teamster members and negotiate the plan with the union. So far, the Company has refused to negotiate these matters with the union. As of May 1, 1998, the pension contribution to be made by UPS to each pension fund will be the larger of: 1). the amount due to the applicable fund under the January 1, 1993, Central States Pension Plan, as if the Local had remained under that Plan, plus fifteen percent (15%) of the funds’ contributions to UPS in the current year on behalf of retired members of the Local who had received a monthly benefit in the current calendar year; or, 2). the amount that would be contributed if the UPS employees in the Local were covered under the UPS/IBT 1997 National Master Freight Agreement’s pension plans. In other words, UPS will pay a certain amount into each fund, but will only make payments to the extent it is certain that the funds benefit the employees at that Local.
In addition, any new money that becomes available to the larger plans, such as enhancement funds, will be paid in a manner agreed upon by the UPS and the Union.
If, before July 1, 1998, any of the 37 funds should fail to meet Internal Revenue Service, ERISA, or any other requirements, UPS will stop its contributions to that fund until it does comply. In that case, UPS will take the matter to the appropriate fund board of trustees – regardless of whether any union member is elected to the board. Additionally, as soon as the two sides negotiate a new Fund, employees will continue to receive their "pension subsidy." If upon retirement, they can qualify to have the "subsidy" continued, they will do so. If not, it will end. The health benefits payment was to continue, but beginning July 1, 1997, a set amount of each local’s pension funds would be set aside to fund employee retiree benefits. If a retiree can meet the criteria established, they would receive benefits from this fund. The provision originally stipulated that the funds, except for the portion allocated to the health benefits contribution, are not subject to retroactive adjustment or correction. This provision included the phrase "not subject to audit." This was eliminated some time ago; Plan A is now subject to audit.
Advantages and Effects for Employees
The UPS National Master Agreement (NMA) brings a host of benefits to employees, including improved pay and benefits, enhanced job security, and better working conditions. One of the most significant advantages is the increased wages for the vast majority of employees covered by the agreement. For example, over the past three years, UPS has paid roughly $900 million in retroactive pay supplements to its Teamster package drivers, the largest payment of its kind in North America. The retroactive pay supplement effectively narrows the gap between pre-existing and newly ratified wages, thereby ensuring pay parity across the board.
In addition to retroactive pay supplements, the NMA also enhances the retirement benefits for employees. For example, UPS’s pension fund grew from a deficit of roughly $10 billion to an approximately $9 billion surplus spanning nearly 100,000 active employees. Further, UPS agreed to contribute millions of dollars to Teamster pension funds over the next 10 years to address its multi-employer benefit plan obligation and ensure retirees have reliable benefits for years to come. Such contributions provide additional financial security and stability to the lives of employees and their families.
Similar to retirement benefits, the NMA also ensures employees enjoy more comprehensive healthcare benefits. By 2028, UPS will contribute $6.1 billion to Teamster healthcare plans. Such contributions will ensure employees receive quality health insurance at no out-of-pocket cost. The decision to maintain health insurance benefits without additional costs protects not only current employees but also incentivizes new employees to join the workforce.
Job security is another crucial aspect of the NMA that benefits the workforce. Prior to ratifying the NMA, UPS experienced difficulties in hiring full-time employees, in part due to competition for top talent. However, the NMA addresses this issue by ensuring all part-time employees have the opportunity to apply for a full-time position within 30 days of passing their 90-day probation period. By increasing opportunities for full-time employment, the NMA prevents underemployment and creates a clear path for career advancement.
Finally, the NMA improves working conditions for employees. For instance, the NMA reduces the threshold for overtime eligibility from 65 to 40 hours per week. Prior to ratifying the NMA, many employees had no choice but to work five 10-hour days per week. Now, with a lower threshold for overtime, employees can benefit from greater flexibility in their schedules.
These represent just a handful of the valuable benefits and positive impacts of the NMA. As the NMA ensures improved job security, financial stability, and other benefits, such enhances will no doubt continue to improve the work/life balance of the UPS workforce.
Criticism and Issues
Challenges and Criticisms of the UPS National Master Agreement and Local Supplement
Despite the current period of labor peace, the National Master Agreement for the Teamsters, which covers in the vicinity of 250,000 UPS employees, has been the subject of several controversies. One significant controversy involved the United Parcel Service ("UPS") practice of utilizing full-time, supervisory "helpers" to pick-up and deliver packages. In 2005, Local 177 of the Teamsters grieved the introduction by UPS of "Parcel Assistants", or supervisory "helpers" who were full-time salaried supervisors assigned to help package drivers with the pick-up and delivery of packages. The Teamsters alleged that this practice was a violation of Article 26 (J) of the 2002-2007 National Master Agreement which states that:
Accordingly, UPS agreed to discontinue the use of "Parcel Assistants" and surreptitiously began utilizing "Full-Time Supervisors (FTS)" to perform the pick-up and delivery of packages. This practice was also challenged by the Teamsters and was the subject of litigation upon which arbitration was requested.
In March 2007, the arbitration panel denied the grievance in its entirety. In September 2008, the National Master Agreement between the Teamsters and UPS was amended in several notable ways: new Article 7, Section 1(d) was added, requiring UPS, prior to implementation, to notify the Union of the names and status of any employee they are adding to the bargaining unit and, if that employee is not on record in the Company’s database, the reason for that status; and the newly adopted Article 8, Section 10 requires UPS to report monthly on the number of package drivers and clerk and driver-clerk are reassigned to a supplementary classification .
In April 2010, the Teamsters reached an amicable settlement with UPS regarding the use of Parcel Assistants/Fully Time Supervisors. As part of the settlement UPS agreed that if it utilizes supervisory employees for any pick-up and delivery functions it will pay those employees at the wage rate of the highest wage employee covered by the collective bargaining agreement being employed by UPS to perform the same job duties. The settlement permits the Company to continue to use these supervisory employees, so long as it abides by the terms of the settlement agreement.
For employers and unions, the Supreme Court’s decision in United Parcel Service v. Mitchell, 451 U.S. 56 (1981) is also something of a warning. In that case, UPS refused to promote employees who were not qualified to meet federal regulations for their position. UPS also refused to promote the employees because it did not, and could not, bargain about the qualifications necessary for promotion under the National Master Agreement. Ultimately, the Court held that the failure to comply with UPS’ skill requirement was not a violation of the collective bargaining agreement as a whole.
These and other developments emphasized the utilities and limitations of a National Master Agreement.
The Process of Negotiation
The negotiation of the United Parcel Service’s National Master agreement begins with a meeting between the UPS management and union officers of Local Unit Unions. This meeting takes place approximately 60 to 90 days prior to the expiration of the agreement. The Local Unions provide a list of requested changes in the agreement. Each Local Union negotiations a separate contract with UPS which can focus on Local conditions.
From this process a list is developed of Local Unions’ "proposed changes", which are then considered for inclusion in the National Master. On April 19, 1998 the National Master Agreement between UPS and the Teamsters was opened for renegotiation. The parties agreed to extend the life of the previous agreement for an additional 30 days. At the end of this extended period, the National Master agreement was accepted as written with no negotiations taking place. This occurred a few other times in the past seventeen years.
In the most recent round of negotiations which concluded on March 31, 2003 the Teamsters and UPS agreed to an eleven percent wage increase over five years. Pension increases were achieved with a five dollar increase per month, ten dollars for retiree health care. In addition, the pension fund was added to the "Blue Chip" fund to improve the financial stability of the fund. The language on part-time employees becoming full-time employees was improved for the first time since 1994. The change in the percentage of new hires to become full time was changed from 65 to 70 percent of the part-time work force becoming full-time work in every five years, also up from 65 percent in 1998. The current contract provides for a two-month extension from October 1, 2008 to November 30, 2008.
The upcoming negotiations on October 15, 2007 for the 2008 agreement will include a total of 288,000 Teamster members. In addition to freight drivers, package delivery drivers, and warehouse workers, the package handlers, air drivers and pilot groups are now included in the mix. In reality, the agreement is negotiated with a three or four member team representing the Union and Management. The Union negotiators provide a comprehensive list of each of the concerns of the various classifications of employees to the company. These are not only items such as wage increases and hours, but also safety, security, sexual harassment, workplace violence, uniforms, ergonomic issues, and technology and work volume are addressed.
Future Perspectives and Consequences
The future implications of the UPS National Master Agreement must be viewed against a backdrop of four key elements. First, are the emerging trends and shifts in the labor market that will influence the demand for driver positions? Second, are the potential changes in the law that could alter the landscape for both employer and union. Third, is the labor movement itself, which is susceptible to cyclical trends that may dictate future negotiations. And last, even if these three factors remain constant, how will future economic conditions impact the negotiation process down the line?
On a macro-level, the rise of automation and technology – some argue – will be the silver bullet to alleviate our crisis of growing demand and diminishing supply. Indeed, it’s only a matter of time before package delivery robots and drones become an everyday feature of the urban landscape. But it’s too soon to say what impact small-scale technology will have on UPS’s larger, delivery operations. Even as society gradually comes to terms with the utility of robotics, more and more packages are created by the convenience of the e-commerce shopping experience. Package delivery trucks are ubiquitous in our lives and local communities, and the sky’s the limit if you can get ahead of those safety and efficiency hurdles.
More likely is that something less dramatic than full-scale automation will come into play over the next decade, such as advances in efficiency, speed, and regularity of deliveries. Innovations like standardized delivery windows, digital tracking, and artificial intelligence insuring timely drop-offs en masse. And while these improvements may be perceived as "the worst thing that could happen to the union," UPS has been able to consistently find ways to repurpose those efficiencies and reinvest resulting savings into member benefit packages.
There are some indications that technology may lend itself to employee empowerment and well-being. As technology pervades the workplace, job seekers may require additional tech skills to meet application guidelines. This could lead to more codes of conduct , requirements that result in job applicants being better informed about their rights while working and even the tools to assert them. It may be that protections for all employees are made more necessary by burgeoning technology. Time will tell.
And then there is the possible impact of deregulatory efforts. Unforeseen changes to the regulatory framework can alter the ability for judicially enforceable agreements to be implemented. Litigation concerning the enforceability of arbitration agreements and class waivers is as relevant here as any industry. Changes in immigration and labor laws can reduce either the number of employees willing to work or increase the rates of those who do. Whether the current administrative policies follow through on their promises is yet to be seen and those changes may alter the workforce landscape.
In terms of the labor movement itself, unions may equally be subject to cyclical trends. It has already withstood two recessive periods of the last decade, along with the corresponding drops in membership that accompanied these downturns. At the other end of those recessions have been periods of vigorous union resurgence. Union contracts are not immune from the ebb and flow of the economy. A downturn can mean a sharp decline in union membership ranks, often in the face of a real or perceived need for job security, decent pay and comparable benefits. On the flip-side, a stronger economy means fewer drivers seeking out new employment. And even during rough economic times, certain segments of the labor force remain impervious to even the most challenging times.
The effect of the Ford Motor Company strike in 1936-37, when GM was asserting themselves as the dominant force in the automotive industry, was stymied by a union-ready workforce chomping at the bit to unionize. The same could be said about the United Mine Workers during the labor shortages of the 1910’s and 20’s, as well as the International Ladies’ Garment Workers Union in the post-war period of 1947-1957.
Lastly, and perhaps as important as the above three items, are the larger economic cycles that are wholly outside of both union and management control. A bullish economy in the near-term may mean inflation, possibly even stagflation, which would surely need to be reigned in. In that de-inflationary environment, demand for workers is likely to remain flat, with any stagnation more likely to translate into a price challenge for package delivery. Either way, in any such disruption, the stakes are high for all involved.