UPS, Teamsters reach tentative labor deal avoiding strike

United Parcel Service Inc. reached a tentative agreement to renew a five-year labor contract with the Teamsters ahead of the July 31 deadline, giving relief to stressed shippers and removing a share-price overhang for investors concerned about a costly strike.

The agreement, which has to be ratified by the about 340,000 teamsters that it covers, contains $30 billion of new money from UPS over the life of the contract, according to a statement Tuesday from the International Brotherhood of Teamsters. 

“The union went into this fight committed to winning for our members,” Teamsters President Sean O’Brien said in the statement. “We demanded the best contract in the history of UPS, and we got it.”

The resolution to the talks is also a win for UPS Chief Executive Officer Carol Tomé, who had insisted that a deal would get done to head off a strike that could have been called as soon as Aug. 1. She had said that the changes in the contract would be a win for workers, the company and customers. The courier had lost some volume to competitors as its customers prepared for the worst and that trickle would have turned into a gusher as the strike date approached.

“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,” Tomé said in a separate statement that didn’t detail the terms of the agreement. 

UPS shares jumped on the news, rising as much as 2.5% in New York before paring the gain.

UPS will have to boost efficiency to absorb the higher cost of its labor force at a time when package demand is declining and customers are looking to claw back the surcharges and price increases that couriers applied liberally during the pandemic. The market weakness compelled FedEx Corp. to undertake an effort to slash $4 billion of costs by fiscal 2025 and reap another $2 billion of savings by fiscal 2027 from the restructuring of its networks.

The union was able to wrangle several concessions that are important to members, including eliminating a class of drivers who earned less, air conditioning in new vehicles and an additional paid holiday. O’Brien ratcheted up the pressure on UPS by starting the talks later than usual and insisting on doing first the regional agreements that were traditionally completed after the nationwide contract was ratified. He also included “rank-and-file” union members in the negotiations. 

His strategy paid off. Existing full- and part-time UPS union workers will get $2.75 an hour more in 2023 and $7.50 per hour over the five-year contract, according to the union. Part-time workers will get a raise to no less than $21 an hour compared with the starting part-time wage of $15.50 for 2023 in the existing contract. Delivery drivers will have an average top rate of $49 an hour, the Teamsters said.

Voting Period

UPS union members will vote to ratify the new agreement from Aug. 3 to Aug. 22. 

Shippers and investors were getting more nervous when the Teamsters broke off talks on July 5 after rejecting the company’s offer for part-time wage increases. UPS reached out to the Teamsters last week to renew talks. The agreement was finalized Tuesday in the first meeting of the renewed talks. 

O’Brien has said he wants to hold up the UPS contract as an example of what salary and benefits the Teamsters can provide for warehouse workers and has said he wants to next organize Amazon.com Inc. workers.