The APWU Contract and How the Process Compares

One of the problems the Postal Service will have in selling the contract with the American Postal Workers Union is the number of new members of Congress with limited understanding regarding the impact of differences in labor law between the law covering the Postal Service and either the National Labor Relations Act or the Railway Labor Act.   In addition many members of Congress will find it difficult to understand why the Postal Service did not take the approach that Wisconsin Governor Walker took with public employees, or President Reagan took with air traffic controllers.


The Postal Service did not have the option to decertify the union as President Regan did as members of the APWU never stopped working after the contract expired. Nor could the Postal Service unilaterally force cuts in compensation as it is not in a legal position that would allow it to break existing contracts and impose contract terms that it would prefer.  A good summary of the negotiation process has been provided by the Postal Service.

Better comparisons are recent negotiations between the Teamsters and both United Parcel Service and Yellow Roadway working under the Labor Relations Act and Conrail that had to renegotiate under the Railway Labor Act.   The following is a brief review of what happened in each of these three examples.

Over the past two decades, United Parcel Service has faced increased competition from FedEx with underfunded multiemployer pension plans sitting over its head. It took a strike in 1997 over the pension issue but eventually had to concede its demand for pension and other contract changes.  Its concessions came once UPS management recognized that the strike gave FedEx an opportunity to prove that FedEx Ground was a credible competitor to UPS Ground service and that the changed perspective would make maintaining marketshare more difficult than before the strike began.   UPS changed its approach to working with its union over the next decade which resulted in a contract in 2007 that allowed UPS to withdraw from the largest underfunded multiemployer plan and make important changes in work-rules and wages that made its operating costs competitive with that offered by FedEx even though FedEx provided service through non-union employees and contractors.
Yellow-Roadway has faced a combination of expanded competition of non-union competitors and a major decline in the nationwide transportation in less-than-truckload market that forced it to combine the operations of its two largest LTL subsidiaries and shutter others. It had also been near bankruptcy for most of the last five years. During this period it had to renegotiate terms of loans multiple times and its stock value plummited to near zero. Yellow Roadway renegotiated its Teamsters contract in 2008 under pressure from creditors However, the problem worsened for Yellow-Roadway when the recession hit and its continuing operations required a second round of compensation reductions with the alternative being liquidation of the business. A new round of cuts were negotiated and agreed upon in 2010 in an effort to save the company. During this period the company cut the number of Teamster employees from 40,000 to 25,000. Even these cuts may not be sufficient to prevent bankruptcy as on March 14, Yellow Roadway stated that it failed to meet a creditor milestone that would allow its creditors to demand full repayment of all loans due.

Conrail faced a different problem in its negotiations as the Railway Labor Act created an environment that forced it to maintain existing contract provisions until a new agreement could be signed. It could have declared bankruptcy which would have allowed it to impose new contracts as has occurred among passenger airlines, but at that time its creditors would have demanded liquidation and would not have supported continuing rail operations under any labor agreement. In addition, political opposition to liquidation was significant as liquidation would have had a significant impact on economic activity from St. Louis to Boston disrupting the ability of the automotive, electric utility and other industries that depended on rail freight service to conduct their business as well as the economies of cities in the from Boston to Washington DC that depended on Conrail operated commuter rail to transport employees to work. Conrail was then forced into a period of extended negotiation with its unions primarily over the elimination of workrules and positions that no longer made sense in a world of diesel locomotive engines. It took almost 8 years to get the changes needed to make Conrail profitable which eventually allowed it to be sold to the public in a public offering.

In all three cases, getting the changes neccessary for a company to survive only occurred once employees were convinced that they had no other options but concede.   For both UPS and Conrail, it took nearly a decade for the changes to be implemented once they were identified.   For Yellow-Roadway, it took less time but the final concession occurred only after multiple reductions in Yellow-Roadway's Teamster employees and the threat of liquidation and loss of all jobs hung over union members' heads.

The Postal Service is in a financial position similar to Yellow-Roadway and a competitive posistion that is closer to what faced both United Parcel Service and Conrail.   Finally, in terms of labor-management relationships, the agreement process has significant similarities to how the Teamsters worked together with UPS, and Yellow Roadway to convince members to accept and implement contract changes.

While its financial position puts it on the brink of default on its obligations to its creditors, creditors have not threatened liquidation like Yellow-Roadway creditors did. 

By eliminating liquidation as an option, the Postal Service is in a position similar to Conrail and must negotiate a contract without the ultimate threat over negotiators from its unions.   The Postal Service is in a better position than Conrail as the threat of binding arbitration, even under current rules forces a time limit to negotiations and existing contract terms.

The Postal Service's position is similar to United Parcel Service as the Postal Service would be hurt by any shut downs, or even slowdowns due to a work-to-rule environment just like United Parcel Service's competitive position was hurt by taking a hard line accepting a strike in 2007.  

The Postal Service's decision to come to negotiate an agreement rather than having one imposed by an arbitrator makes selling changes that would have been included in an imposed agreement easier as the APWU will act a willing partner in implementation, a position that it would not have taken as willingly if similar contract provisions were imposed.  As a partner in implementation, APWU is acting in a manner similar to the Teamster which worked closely with members to explain why changes were required and why changes were best in the long-term interest of employees at UPS and Yellow-Roadway as well as working with UPS and Yellow Roadway to design and implement changes.