UPS reaches tentative contract with 340,000 unionized workers

NEW YORK -- UPS has reached a tentative contract with its 340,000-person union, potentially averting a strike that threatened to disrupt package deliveries for millions of businesses and households nationwide.

The agreement was announced Tuesday, the first day UPS and the Teamsters returned to the table after contentious negotiations broke down earlier this month.

Negotiators had already reached tentative agreements on several issues, but continued to clash over pay for part-time workers, who make up more than half of the UPS employees represented by the union.

The Teamsters hailed the agreement as "historic".

Under the tentative agreement, which still needs union members' approval, full- and part-time union workers will get $2.75 more per hour in 2023, and $7.50 more by the end of the five-year contract. The agreement also includes a provision to increase starting pay for part-time workers -- whom the union says are the most at risk of exploitation -- from $16.20 per hour to $21 per hour. The average pay for part-timers had been $20.

Teamsters general president Sean M. O'Brien said in a statement that UPS put $30 billion more on the table because of the negotiations, saying the deal "sets a new standard in the labor movement."

The two sides had already tentatively agreed to make Martin Luther King Jr. Day a full holiday and to end forced overtime on drivers' days off. Tentative agreements on safety issues were also reached, including equipping more trucks with air conditioning.

UPS had also agreed to eliminate a lower-paid category of drivers who work shifts that include weekends, and convert them into regular full-time drivers. Under the agreement, the company will create 7,500 full-time jobs and fill 22,500 open positions, allowing more part-timers to transition to full time.

"Together we reached a win-win-win agreement on the issues that are important to Teamsters leadership, our employees and to UPS and our customers," Carol Tome, UPS CEO, said in a written statement.

Voting on the new contract begins Aug. 3 and concludes Aug. 22.

Industry groups, the U.S. Chamber of Commerce, labor leaders and President Joe Biden applauded the deal.

The White House said Biden spoke via phone with Tome and O'Brien and pointed to their agreement as evidence that collective bargaining works and offered his best wishes for a smooth ratification.

Union members, angered by a contract they say union leadership forced on them five years ago, argued that they have shouldered the more than 140% profit growth at UPS as the pandemic increased delivery demand. Unionized workers said they wanted to right what they saw as a bad contract.

Union leadership was upended two years ago with the election of O'Brien, a vocal critic of union president James Hoffa -- son of the famed Teamsters firebrand -- who signed off on that contract.

The 24 million packages UPS ships daily amount to about a quarter of all U.S. parcel volume, according to the global shipping and logistics firm Pitney Bowes. According to UPS, that's equivalent to about 6% of the nation's gross domestic product.

During the last breakdown in labor talks a quarter-century ago, 185,000 UPS workers walked out for 15 days, crippling the company. A walkout this time would have had much further-reaching implications, with millions of Americans now accustomed to online shopping and speedy delivery.

The consulting firm Anderson Economic Group estimated a 10-day UPS strike could have cost the U.S. economy more than $7 billion and triggered "significant and lasting harm" to the business and workers.

Logistics experts warned that the other U.S. shipping companies do not have the combined capacity to handle all the packages that would come their way during a UPS work stoppage, and prices of shipping and goods would inevitably increase. Meanwhile, customers who shop online could have faced higher shipping fees and longer waits.

In recent weeks, large and small businesses worked to create contingency plans in the event of a strike.

Joseph Debicella, a small business owner who sells bridesmaids' gifts online, said his company ships roughly 50% of its orders through UPS. He hasn't used FedEx, but he created an account with the company two weeks ago as chatter over a strike picked up. He was also hearing about the negotiations from his UPS driver, who told him his deliveries were getting lighter as the July 31 deadline for a new contract neared.

Macy's CEO Jeff Gennette told The Associated Press the department store chain was considering its options and that its supply chain team was mapping out what a strike would look like and how it would affect shipping.

If ratified, the deal could prevent major disruption just as retailers are in the throes of the back-to-school shopping season -- the second largest sales period behind the winter holidays.

The Retail Industry Leaders Association, a national retail trade group that counts retailers including Best Buy, CVS Health and Kohl's as members, called the tentative pact "an enormous relief to retailers, who have been navigating the possibility of a strike and the associated uncertainty for weeks."

"We're grateful that this challenge, which would have had a price tag in the billions of dollars and a long runway for recovery, was avoided," the group said in a statement.

Labor experts see the showdown as a demonstration of labor power at a time of low U.S. union membership. Unions have grown more active this summer thanks to several organized-labor pushes at major companies.

Hollywood actors and screenwriters are picketing over pay issues. United Auto Workers are considering a potential strike.

"This is how it's done!" Association of Flight Attendants-CWA President Sara Nelson said in a statement after the UPS deal was announced. "And this labor solidarity summer just got stronger."

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Associated Press writers Matt Ott in Washington, D.C., and Anne D'Innocenzio in New York City contributed to this report.