Postal Service Recognizes Political Reality

The legislative changes that the Washington Post reports that Postal Service is now proposing represents the Postal Service's reaction to political reality.   There are no legislative options that can pass Congress that prevent default with changes in the current payment of retiree obligations or an increase in the Postal Service's debt ceiling without significant cuts in labor costs.

The news reports indicate that the Postal Service wants to make four changes that affect its unionized workforce.

• Withdrawal from the federal benefits program for active employees;
• Withdrawal from the federal retirement benefit programs;
• Elimination of statutory layoff protections; and
• Changes in the proportion of part-time and non-career positions.

Changes Proposed Similar to Firms Facing Liquidation

The changes that the Postal Service proposed are not unlike changes in union contracts of private sector firms facing bankruptcy and possible liquidation.  In these cases,  banks providing loans required to fund continuing operations including payroll made changes in union contracts a condition for restructuring loan agreements and/or providing additional funding.  

Over the past few years, YRC Worldwide has made changes to its Teamster contracts on at least two occasions that are more severe than what the Postal Service has proposed in order to get financing to avoid bankruptcy.   YRC Worldwide  employees have experienced nearly a 40% reduction in employee counts, pay cuts of 15% from 2009 levels, reductions in benefits, and a freeze in pension benefits at current levels.   

The changes were made in contracts ratified by Teamster employees of YRC Worldwide on at least two occasions, with each contract resulting in more cuts in pay and benefits.  These changes were tough for Teamster leadership to sell to YRC employees but the prospect of losing a job in a recession created significant incentive to accept the cuts.  

The contracts that the Teamsters negotiated with YRC from what the Postal Service has proposed, as the Teamster contracts have resulted in a significant portion of the company now owned by Teamster employees.   Teamster employees now own 25% of YRC stock after the latest restructuring announced in July, 2011. 

Postal Unions Have Limited Political Options

Both the American Postal Workers Union and the National Letter Carriers Union have issued statements opposing these changes.   However, they have limited power to influence the legislative process given both the political makeup of Congress and the budget constraints.  If Congress was willing to pay chicken with entire economy over raising the debt ceiling, there should be no doubt in unionized Postal employees that Congress would find shutting down the Postal Service preferable to agreeing to a proposal that does not have significant reduction in employee compensation.

Postal Unions may not be powerless as it requires 60 Senators to pass any legislation.   While this may not prevent changes in compensation, benefits, and workrules that the Postal Service has proposed, it could make a difference in improving the terms that the Postal Service gets in increasing in debt ceiling and/or restructuring payments for retiree benefits.   Clearly, to the extent that the transition assistance provided to the Postal Service involves restructuring retiree obligations instead of adding debt to making payments on the current schedule, the restructuring both increases the probability that the restructuring will succeed and the proposed changes in compensation, benefits, and workrules may be the only ones that employees have to deal with in the next few years.