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  • A Special Delivery for UPS That Could Change FedEx Overnight

    Special interest handouts are not a pretty sight. Perhaps that is why lawmakers buried their latest one inside the bill reauthorizing the Federal Aviation Administration. Unfortunately putting handouts out of sight does not make them any better for the economy.

    At issue is the fierce competition between FedEx and the United Parcel Service (UPS) in the package delivery business. While UPS must collectively bargain with the Teamsters, FedEx remains union free.

    FedEx has avoided the costs of collective bargaining primarily by keeping its employees satisfied without union representation. Fortune magazine routinely recognizes the company as one of the best 100 companies to work for. When the recession forced FedEx to cut costs it started with executive salaries before cutting hourly pay – including a 20 percent reduction in CEO Fred Smith’s pay.

    Federal law has also helped FedEx stay nonunion. The Railway Labor Act (RLA) – the law regulating unions in the airline and railway industries – covers FedEx because the company began as an airline and ships most of its packages by air. UPS – a trucking company – falls under the National Labor Relations Act, which covers unions in the rest of the private sector.

    Under the Railway Labor Act (unlike the NLRA) every worker in the company votes on organizing in one national ballot. At a company where most workers like their jobs such a vote presents Teamsters organizers with a daunting task. They would have an easier time selectively organizing key transportation hubs. Then they could use the leverage of shutting down the national company to promise workers at those hubs excessive concessions. Under the RLA they cannot do that. So as long as FedEx workers like their jobs and FedEx remains under the RLA the company will likely remain nonunion.

    That gives FedEx a competitive advantage. The 1997 Teamsters strike paralyzed UPS, and UPS recently had to pay $6.1 billion to withdraw its employees from the Teamster’s poorly managed pension plan. UPS wants the Teamsters to start similarly burdening FedEx.

    The Teamsters and UPS are jointly lobbying Congress to transfer jurisdiction over FedEx to the NLRA to make unionizing FedEx employees easier. The Teamsters want more dues-paying members to shore up their shaky finances. UPS wants the Teamsters to raise their competitor’s costs. Lost in the middle of the lobbying blitz is the health of the economy.

    Saddling FedEx with union work rules and collective bargaining would raise their costs, forcing them to raise prices. Americans will have to pay more to ship parcels, leaving less money to spend elsewhere. And if the Teamsters did strike against FedEx hubs it could paralyze package delivery for millions of small businesses – the two week UPS strike in 1997 cost the economy billions of dollars. Making businesses less competitive is bad policy in normal economic times, much less in a severe recession.

    However, Organized Labor is no ordinary interest group. Labor unions spent hundreds of millions of dollars electing President Obama and the current Congressional majority and they want payback. They have been getting it. Consider that Congress and the administration have already:

    · Bailed out unionized GM and Chrysler;

    · Bailed out the pensions of union workers at GM subsidiaries, but not nonunion workers;

    · Repealed union financial transparency regulations;

    · Required federal construction contractors to sign collective bargaining agreements;

    Unionization opportunities already exist at FedEx, but not the ones that the Teamsters like. So it is small wonder that Congress is happy to re-write the labor code at the Teamster’s behest. The House of Representatives has passed a version of the FAA reauthorization that transfers FedEx drivers to the NRLA, but the Senate passed version does not. A conference committee is hammering out the final version of the bill and will soon decide whether or not to include this handout for the Teamsters.”

    Let it not be said that Obama ignores his friends.

    UPDATE: An earlier version of this post did not acknowledge that the Senate has passed its FAA reauthorization bill.

    Posted in Economics [slideshow_deploy]

    33 Responses to A Special Delivery for UPS That Could Change FedEx Overnight

    1. Joel Palmer, Seattle says:

      I Tweeted a link to this article to my followers. It is eye-opening! Very informative.

      Joel Palmer

      Twitter: @politicallogic

    2. Liz, United States says:

      Further evidence that labor unions themselves should be banned. Sad.

    3. TN, Midwest says:

      To the author, the reconciled version of the FAA Reauthorization passed a few weeks back without the change in labor classification. Many pointed to the ugly health care debate as the reason, congressmen removed anything contemptuous in this bill to appease the general public's disgust with the healthcare passing.

    4. Mike Webb says:

      How can a company "burdened" with union rules successfully compete with a company that has 'private contractors'? Both companies charge close to the same rates. But the union company has less turn over and better benefits. It is easy to see that there is a difference in where the revenue is spent. A stable workforce or one that is high turn over and multi-layers of sub-contracting. You may wonder who really has their hands on your package at any given moment. This may be something Homeland Security might want to look into.

    5. Billie says:

      I appreciate all business who's employees stand on their own without expensing themselves for a union to stand above them.

    6. Paine, New England says:

      You are …(I am sad for America, because of your ilk)… a whore. A literate whore, but nothing but a clever whore. Eat well … before your sentence is complete.

    7. Ken Chandler AZ says:

      I love both companies but I prefer FedX because thay are not involved with a union.

      Unions are very destructive and Socialistic in nature.

      Go FedX !!!

    8. John G, Fl says:

      Go Fedex! Obamas payback to the union thuggery is no surprise unfortunately. The news of UPS having to bailout its employees pension plan from the Teamsters is news though.

    9. Ron, ND says:

      Fedex, in my opinion based on personal experience, out performs UPS.

    10. Bill, Kansas City, M says:

      This is why we need term limits and campaign finance reform for Congress.

    11. Tim, MO says:

      Mike, you're not a teamster are you?

      Think about it, if unionization provides a competitive advantage to a company, why would UPS want Fedex (their competition) to be unionized?

    12. William Downey, JD L says:

      I prefer FedEx to UPS for delivery of important documents.

      Also the labor standards were not as I understand the FAA bill changed.

    13. Ross writes from Flo says:

      Disgusting! I believe that labor union should not be in the public sector under any circumstance and limited to in-state (if a state is stupid enough to have them),never interstate. This would mean the disbanding of the Dept of Labor, thus federal meddling in state affairs. Also that labor unions cannot use worker funds to contribute legally or illegally to political parties, canidates, nor other socialist causes in any form, but to use their organization and money for the workers health, welfare, and retirement.

    14. William Person says:

      I am curous to know what happens to pensioners of FEDEX when and if the Unions take over collective bargaining at FEDEX? Will the Unions insist upon including existing pension monies be transfered to management (and payout) that benefits all existing pensiuoners and piotential pensioners in the collective bargaining agreement?

    15. Pingback: UPS vs. FedEx

    16. Wildcat from Dallast says:

      I’m a former FedEx employee who recently worked in one of their six or seven companies for almost five years before being recruited to return to my first profession. The senior leadership at FedEx corporate keeps their employees well informed about what is going on that they have to expend time and money on relative to maintaining their business status and labor status that has no beneficial revenue impact other than it keeps the “wolves” from destroying our ability to simply do business. We were apprised of this at least on one or two times during my tenure there which spanned the Bush years and the first several months during the “war on prosperity”.

      The union that has UPS tied up financially attempted to get the federal government to make FedEx allow them into all their locations to grow their union throughout FedEx but was denied due to the way in which Fred Smith first organized his company. The difference this time is who specifically is in the Oval office and his connections and desire to payback such unions as evidenced with GM & Chrysler and the UAW and SEIU and their tentacles in about every negative piece of legislation written, proposed and passed since the manchild’s inauguration. I’m confident FedEx will have to expend time and resources just to maintain their status quo as an “airline company” rather than on replacing equipment, increasing wages and paying out the “Purple Promise” bonuses to their employees.

      Since FedEx does not have to deal with all the “organized labor” or (union) rules [and crap] they can and are more flexible and adaptable to the market place while taking care of their employees than unionized labor of companies organized as “trucking companies”. And, by the way, just due to my non-work related interactions with people from other businesses in the area where I worked and lived during my tenure at FedEx I learned they also used independent contractors to perform some of the same functions I did! They didn’t get paid as much for doing that work nor did they have health insurance benefits because they were contractors and not bonafide UPS employees. Of course perhaps that is because that aspect of the work (or specific tasks) was unloading aircraft at the UPS ramp at the airport and not the next step in the process at the UPS terminal. The actual UPS employees doing the route delivery aspect somehow where allowed or were required to work shifts in excess of what I was allowed to by Department of Transportation (DOT) rules. I was not able to ascertain how their drivers (allegedly under the same DOT rules as FedEx is) were scheduled and expected to work 12 to 14 hours a day to deliver packages at least five days a week when our full time couriers were far more limited and monitored for compliance? Safety must have been a non-management issue with UPS until the number of accidents started climbing.

      One of the reasons, in my assessment, that FedEx routinely outperforms UPS is that the senior leadership seems to be well educated, their ethics have to be beyond reproach and they go the extra mile and then some to take care of all their employees from the most junior loader upward. They have the same market place challenges that UPS has but are able to adapt more rapidly while supporting their employees with competitive pay and benefits without the interference of union shenanigans and the unwanted labor relations regulations foisted upon businesses who have to deal with unionized labor and the federal government’s onerous rules.

    17. samuel pierce seattl says:

      Can't we file a lawsuit against this legislation,something like it being unconstitutional to force workers to unionize against their will?Also lets pass a bill saying that if an organized group is going to donate a bunch of money to democrats in such a lobbying campaign they have to give the same amount to the opposite group .To not do so would be very unfair and also unconstitutional.

    18. samuel pierce seattl says:

      Is it not just treasoness that a labor group can even dictate our legislation here in the good ole U.S.A. Lets start using the courts to stick it to these damn commies!

    19. Drew Page, IL says:

      Welcome to the Chicago Way. Getting in bed with the trade unions is exactly how the current Mayor Daley and his father, the former mayor, kept their power base in Chicago. Any company that has ever held a convention in Chicago will attest to the costs of union labor, especially if you plan on using an exhibition hall like Mccormick Place. Just try to change a light bulb or plug into an electric socket on your own and see how fast you'll be slapped with a union grievance.

      Listed as the most frequent visitor to the White Hous is the head of SEIU, the service employees union. Mr. Obama himself has conceded he would not have attained the White House had it not been for union support. He owes his job to union contributions and union votes. Is there any doubt in your mind how he will vote when it comes to saddeling Fed-X with the Teamsters Union? Of course, it will all be done in the name of "fairness". He will even say, "let me be clear about this".

    20. Jeff Kleb (Richmond, says:

      Something overlooked is the ILLEGAL misclassification by FedEx of employees as 'contractors'. FedEx doesn't have to pay overtime, sick days, vacation or hralth benefits. Additionally, they put much of the burden of capital costs (truck, fuel, insurance, tires, tags, maintenance, etc.) on the workers. Independent 'contractors' will never be able to organize, either; something FedEx fears because of their poor treatment of workers.

      While the unions are corrupt & have ulterior motives in this issue, FedEx bears much of the blame for this imbroglio. FedEx has gradually abandoned the PSP (People, Service, Profits) philosophy that built the company and made it a great place to work. FedEx has gone downhill quickly during the past ten years or so, and will probably never be what it once was.

    21. Tony Forret says:


      You "Sherked" your responsibility in your little column in telling the whole truth about Fedex and UPS. You don't mention a thing about how Fedex abuses classifying drivers that are totally beholden to them for all their work, and lease/purchase their trucks from Fedex TO Fedex, as "independent contractors." They, therefore, provide no benefits. They pass the cost of benefits and truck maintenance, on to the "independent contractrors" who are totally DEPENDENT on Fedex. They split their shifts, to avoid paying overtime. And, finallly, a company that has purchased such large nonunion motor-carriers as Viking Freight, American Freightways, Watkins Motor Lines AND Roadway Package Service, can hardly claim continued protection under the auspices of the Railway Labor Act. Tell the WHOLE TRUTH, not the redacted version, Mr. Sherk.

    22. Leslie, California says:

      UPS has better service and lower costs. I have used both Fedex and UPS for my business and I prefer UPS.

    23. iban says:


    24. George Landrith, Fairfax, Virginia says:

      As a conservative, I found this article highly inaccurate and misleading except for one sentence — “That gives FedEx a competitive advantage.” Everything else pretty much missed the point. The issue is whether two competitors will be regulated by radicially different laws. FedEx likes to brag to prospective customers that the Railway Labor Act (RLA) makes it “union proof” in an effort to attract new accounts. FedEx also argues that if its truck drivers were regulated as all other express delivery companies’ truck drivers are – by the National Labor Relations Act – it would force FedEx to unionize. But facts are stubborn things and show FedEx’s claims are false.

      Of the FedEx employees regulated by the RLA – the law that FedEx brags makes it “union proof” – they are highly unionized – over 95% are unionized. And the FedEx employees regulated under the NLRA – the labor law that FedEx claims would unnecessarily force it to become unionized – have almost no unionization — less than 1% of these employees are unionized.

      One thing I know is that when the someone is caught dissembling, it means they are playing a rather shabby political game. In this case, FedEx appears to be engaged in a disingenuous lobbying effort to keep its truck drivers regulated as if they were airline employees. But why?

      FedEx and UPS and other express delivery companies compete to provide consumers with a wide-variety of shipping services. They both have large fleets of aircraft and pilots and crews to operate them. They both have huge fleets of trucks and a vast army of truck drivers to deliver their packages to homes and businesses across the globe. But although these companies are competing in exactly the same business, they are governed under a separate and unequal set of labor regulations. It would stand to reason that they should be regulated by the same rules, but they are not.

      While every American understands the importance of equal treatment under the law, some conservatives are hesitant to treat these competitors equally because unions also support the legislation. But FedEx’s “unionization” argument has already been proven false. And while I’ve never been a political ally of big labor, when I supported more domestic energy drilling in Alaska, I did not let the fact that unions also supported drilling dissuade me. Facts are stubborn things and I don’t much care who agrees or disagrees with me. When I’m right, I’m right.

      Equal treatment under the law is foundational to our American system of limited constitutional government. Without equal treatment under the law, America simply would not be America. But the truth is one can support equal treatment under the law and not fear unionization or greater power for unions.

    25. Pingback: A Special Delivery for UPS That Could Change FedEx Overnight « Mr.Parcel's Blog

    26. Pingback: House and Senate Cloakroom: May 17–21, 2010 | Conservative Principles Now

    27. Sam Lutheran (Califo says:

      It's amazing to see the state of our working class, and how deregulation, and the decline of our union membership has left many without jobs,homes and representation or much of a voice. It is time to send a message to our representative and corporations that enough is enough. Fedex is one corporation that needs to play fair to their compeitition and to their own employees who deserve a better future for them and their familily. They need to not hide and pay their fair share of taxes and allow their so call contract workers to be Fedex employee's with full benefits. What a shame to use workers and not provide them with benefits.

    28. Pingback: Dispatch from the Front: The Week of June 21 « Shopfloor

    29. Mark Zeller, Marylan says:

      Mr. Shirk,

      I am not sure if you are attempting to be objective in your article, but Mr. Landrith seemed to hit the nail on the head.

      However, I would add that in 1995-1996, Federal Express Corp. lobbied successfully to re-introduce the term "express" into a bill. This re-introduction placed FedEx Express under the RLA umbrella and only them. The only other "courier" company with "express" in the title had disbanded some many decades before, and Congress was removing "express" to clean up the legislation.

      Thereby, FedEx successfully lobbied and gained a severe and unfair competitive advantage.

      Thank you,

      Mark Zeller

    30. John Monson, Califor says:

      If UPS sees an advantage to be regulated by the RLA, let them switch from the NLRA to the RLA.

    31. Gerald Indaina says:

      How can Obama force a company to join a corrupt teamsters union? This payback will cause FedEx to raise costs layoff non-union members

    32. PAUL MEMPHIS says:


    33. ANdy says:

      Nowhere is the difference in business models more evident than in the aftermath of the September 11 terrorist attacks. After the attack the Federal Aviation Administration (FAA) grounded all airlines for a few days. UPS off-loaded the air packages from their planes and rerouted them through their ground system and got them delivered. The FedEx air packages just sat in their planes until the FAA lifted the ban.

      FedEx couldn't reroute their air packages because FedEx Express and FedEx Ground operate as two seperate companies. FedEx Express drivers are company employees who get paid an hourly wage. FedEx Ground and Home Delivery drivers are independent contractors who get paid per package.

      Additionally, FedEx Express, FedEx Ground, and FedEx Home Delivery have their own seperate sorting facilities located apart from each other. There is no cohesiveness of operations like UPS.

      Read more at Suite101: UPS vs FedEx-Comparing The Major Shipping Companies | Suite101.com http://suite101.com/article/ups-vs-fedex-comparin

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