Did Darrell Issa Sabatoge the USPS-APWU agreement

In letter to American Postal Workers Union (APWU) members, APWU President Cliff Guffey identified that a key obstacle to ratification of the contract is rank and file anger with the efforts of Republicans to restrict union rights and reduce the pay and benefits of public and postal employees.   President Guffy's letter indicates that the tone that Republican members of Congress at the April 5th House Oversight and Government Reform hearing combined with the state legislative conflicts in Wisconsin, Illinios and Ohio created an environment in which rank and file APWU members are looking for a way to protest the treatment of unionized employees by Republican politicians.   The APWU-USPS ratification may have become the vehicle for that protest.

The press release quoting the letter lays out President Guffey's argument that the APWU-USPS contract is not the place to vent anger at Republican politicians.

Some very powerful politicians have set their sights on postal employees, APWU President Cliff Guffey has warned, and union members must respond decisively.

“Anti-labor members of Congress have said the union’s tentative Collective Bargaining Agreement [PDF - members only] is too favorable to workers,” the union president noted. “They favor contracting out virtually all of our jobs.

“I have a simple response,” he said. “I encourage every APWU member to get actively involved in union affairs — and to start by voting on ratification of the tentative Collective Bargaining Agreement. We also must get much more involved in the legislative arena.

“Don’t let these naysayers discourage you from voting.”

At an April 5 hearing of the House Oversight and Government Reform Committee, Chairman Darrell Issa (R-CA) and other Republicans repeatedly criticized Postmaster General Patrick Donahoe and members of the USPS Board of Governors for agreeing to the union’s demand during negotiations to retain protection against layoffs. They also said the Postal Service needed more freedom to close postal facilities and cut the workforce.

“This is an attack on our collective bargaining rights,” Guffey said. “The APWU and the Postal Service reached an agreement that would benefit both sides — and now anti-union legislators are attempting to undermine it.”

President Guffy is right to warn APWU members to not use their vote on the USPS contract to vent anger at Republican politicians.   APWU members need to look at the contract and decide whether they can live with the changes in workrules and in particular the possibility that many positions will follow a non-traditional full-time schedule.   They need to determine whether the changes in workrules and contracting-out provisions create opportunities for APWU members that did not exist before and could create opportunities for APWU members to work with the USPS to work with the Postal Service to create products that could compete with presorters.  They need to look at the contract and decide whether it increases or decreases the likelihood that they will have a job with the Postal Service until they are ready to retire given the change in the mix and volume of mail.   They need to look at the changes in pay and benefits for current employees and future employees and determine whether the contract provides them with sufficient protection from health insurance and general inflation as opposed to what could be imposed by legislative action in the current or future Congresses.  Finally, they need to evaluate the risks that exist from turning the development of contract provisions to an independent arbiter who will develop his decision around the time that the Postal Service defaults on payments for retiree health benefit and workers compensation liabilities.

What Happens If the APWU Rejects the Contract?

APWU members now have their ballots for the ratification of the tentative 2010-2015 Collective Bargaining Agreement with the Postal Service.   Like many votes on labor contracts that make significant changes in long-standing work-rules, pay schedules, and compensation levels in industries facing economic change, ratification is not pre-ordained.

Challenging Contract Ratifications

Examples of challenging ratification efforts include both United Parcel Service and Yellow Roadway Corporation.   Unhappiness with a negotiated contract with teamster organized less-than-truckload carriers in the 1970's provided impetus for creation of Teamsters for a Democratic Union.  The 2008 UPS agreement that removed tens of thousands of UPS teamster from the Central States Multiemployer plan, required nearly a year-long public relations effort by the Teamsters union to convince members that members could no longer reject UPS's proposal to set up a separate pension plan just for UPS employees.   Both the 2002 and 2008 contracts also faced opposition due to pay scales for part-time employees who sorted parcels and the number of full time and part-time jobs within sortation centers.   Yellow-Roadway contracts required multiple rounds of negotiations under the threat of bankruptcy and possible liquidation before contracts with major concessions including restrictions in the defined-benefit pension were approved by employees.

The APWU contract has generated vocal opposition from both former APWU President William Burrus and a number of local Presidents. (i.e. NE Massachusetts, Olympia, WA, and Red Bank, NJ)  The opposition even has a Facebook page.

The Process after Rejection

So, given the opposition, it is not unreasonable to ask what happens if the contract is rejected.   While further negotiation is possible, it is more likely the next step would be interest arbitration.   If that occurs the APWU and the Postal Service will select an arbitrator by agreement or by striking from a list provided by the Federal Mediation and Conciliation Service. The arbitration hearings would be scheduled based on the arbitrator’s availability. In the past, such arbitrations generally have been held within a 4-8 month period after the arbitrator's selection.

Likely actions of Parties after Rejection

In arbitration both sides will have to present contract proposals from which the arbitrator will develop a settlement.   The rejection of the contract will likely force the APWU to propose fewer changes in the existing workrules and compensation structure than are contained in the proposed agreement.   Given the 4-8 month arbitration process will delay implementation of any contract changes that the Postal Service believes will reduce its costs, arbitration would force the Postal Service to propose even greater changes in work rules and lower compensation levels than contained in the current agreement.

Results of Arbitration Discretion


What the arbitrator would choose is open to speculation.   APWU members have little clarity regarding whether they would fare better in an arbitration proceeding that follows the rejection of this agreement than what is offered in the contract that they must vote upon.  Each arbitrator looks at the information in front of them independently and contract arbitration following the rejection of a contract by the vote of the rank and file is rare.  The 2007 arbitration that resulted in a NRLC - Postal Service contract followed the rejection of a contract by NRLC rank and file members.  That arbitration decision may provide some guidance as to how an arbitrator will develop his/her decision.

In particular, I would focus on this passage from page 6 of the Fishgold arbitration decision.   "Thus, I informed the parties that they might influence me to make marginal changes to the tentative agreement but certainly not changes of the sort sought by each side in their initial presentations."   If the arbitrator follows this approach in the APWU-Postal Service arbitration, he/she would restrict the APWU and the Postal Service to minimal changes to the contract being negotiated.

While contract provisions similar to what was negotiated would appear to be the most likely outcome of an arbitrator imposed contract, options that are more favorable to management or labor are not out the question.    However, given that an arbitrator would be ruling just before the Postal Service defaults on payments to the Office of Personnel Management and the Department of Labor, the odds of a labor favorable ruling would appear to be longer than a ruling that is more favorable to management.

Congress: The Wild Card

The real wild card in this process is Congress. The pace of legislation will likely preclude Congress from directly affecting an arbitrator's decision or the criteria they must consider in developing a contract but that will not prevent at least the House of Representatives from trying.   More importantly, rejection of the contract would push changes in Postal labor agreements at least 6 months ahead.   This could further sour changes that Republicans in Congress will take any action that resolve the disagreements over retirement obligations in the Postal Service's favor.

Is Arbitration Better for the Postal Service?

Many of the readers of the blog have raised the questions as to whether the Postal Service would have been better served going to arbitration. In a comment to another post a reader provided a history of  previous contracts that were sent to arbitration,   The picture is not pretty.

• 1978 -1981 James Healy rules in favor of unions on COLAs (no cap) and partially in favor of management on no lay-off clause, which is changed prospectively to cover only employees with a minimum of six years of service. Total increases of 31%
• 1984-1987 Clark Kerr rules in favor of unions with penalty overtime over 10hrs, continuation of COLA. Total increases of 13%
• 1990 – 1994 Richard Mittenthal rules in favor of Transitional Employees and Arbitrator Valtin decided the issue of health benefits which resulted in a 4% increase in employees’ share of healthcare cost. Total increases of 12%
• 1994 – 1998 Jack Clarke imposed a four-year agreement with COLA Roll-in. Total increases of 6.25%
• 2000 – 2003 Stephen Goldberg rules in favor of a 3 yr agreement. Total increases of 6.49%

These results are taken from a fact sheet, "A History of Postal Worker Salaries,"  that the APWU developed review the results of all contract settlements including those that were settled through negotiations and those that were settled in arbitration. 
 
The only paper on this topic "Labor Market Outcomes of Postal Reorganization" by D. Richard Froelke, the former manager of collective bargaining for the U.S. Postal Service was published in the book Mail @ the Millennium, edited by Edward Hudgins and published by the Cato Institute.  This paper provides more detail on labor negotiations through the year 2000.   Most importantly, this paper indicates that the problems in wage and benefit levels reflect the continuation of contract provisions and an understanding of pay compatibility that existed in the 1970's that has been nearly imposible to remove in either a negotiated or arbitrated settlement.   The list of arbitrated settlements above, which are described in more detail in the Mr. Froelke's article illustrates that eliminating wage premiums and restrictive work rules in arbitration did not occur even after the Postal Service began presenting significant evidence to an arbitrator regarding the need to control compensation costs.
 
Finally, it is worth noting that many who argued prior to passage of the Postal Accountability and Enhancement Act that steps were needed to constrain wages made recommendations that are not much different than contract provisions in the APWU contract.   For example, Michael Schuyler, Senior Economist at the Institute for Research in the Economics of Taxation made the following recommendations in the paper, "How to Bring Postal Compensation into Line With The Private Sector," a paper published in 2003.

• Increase postal compensation at the rate of inflation until the postal pay premium is reduced or eliminated.
• Increase postal pay more slowly than increases in an index of private sector labor costs to gradually reduce the postal pay premium. 
• Restrain postal wages when the postal worker quit rate is very low or the number of qualified people seeking postal jobs is very high.
• Vary postal wages by geographic region.
• Increase the use of part-time and temporary employees who would receive market or above-market compensation but less of a pay premium than full-time career employees.

With the exception of varying pay by geographic region, the APWU contract goes further than the suggestions made by Mr. Schuyler as it imposes, for non-career and new full time employees, a pay schedule and a definition of a full-time job that most likely closely matches market compensation and work rules for the work that APWU members perform.  The cost of getting the market based compensation and workrules for new employees  is a limit on wage increases for current employees to increases that follow his suggestions.   If the Postal Service can increase the pace of retirement of current APWU members, then I am willing to bet he and others that have written about a pay premium would agree that the trade-off represents a reasonable deal for both sides.

APWU Contract: Facing a Tradeoff

Recent statements from APWU President Cliff Guffey clearly indicate that union leadership realizes that the next contract will result in a trade-off of job security and wages.  In announcing the extension of negotiations for an additional three days, he stated “Every proposal we have made to preserve jobs for our members.  Restoring work that has been outsourced or assigned to managerial personnel will bring stability to APWU members who have suffered extensive excessing and reassignments." 

In agreeing to extend negotiations, APWU President Cliff Guffey clearly understands that the union faces the question:  "Is the risk that the trade-off between jobs and wages could provide less job security if consummated as part of arbitration without providing any relief form the wage and benefit proposal that the Postal Service made in its economic proposal to the union?"

In its economic proposal, the Postal Service proposed a two-tiered wage structure with new-hires earning less than existing employees.  Two-tiered wage proposal have recently been implemented in union agreements at Caterpillar, Chrysler, General Motors, Harley Davidson, and other U.S. manufacturing firms facing challenges relating to the recession and increased competition from manufacturing plants overseas.   A recent New York Times article noted that two-tiered wage agreements in contracts signed recently differ from similar arrangements that were introduced two decades ago in that wages no longer snap back to the higher level at the end of the economic difficulty.  Instead, the new lower wage structure becomes the new wage structure of the company and only existing workers remain grandfathered into the higher wage structure. 

In arbitration, the Postal Service could present the results of union agreements at these firms as well many others to support its economic proposal.   Given the Postal Service's financial condition, and a clear indication that the number of plants and retail facilities where APWU members work will be declining over the term of the next contract to support both the economic proposal and a relatively weak proposal preserving jobs of existing APWU members.

APWU President Cliff Guffey and his leadership team have a difficult job in these negotiations as the cards that the APWU has going into arbitration are weak.  Possibly even more difficult is trying to sell to the rank and file a negotiated contract that introduces wages and benefits for new employees at lower levels that those that existing employees now receive while existing employees receive relatively limited assurances of job security given an expected increase in the pace of plant consolidation.

The Postal Service and APWU could help ease this process by including a number of provisions in their agreement that could ease the mind of employees whether they are asked to ratify a negotiated agreement or required to live with the results of one consummated via arbitration.   These should include:

• A streamlined process for implementing incentive-based early retirement programs with the focus on allowing the Postal Service to implement early retirement programs on a facility by facility basis.   This would give employees faced with the possibility of a long distance transfer, when a plant is consolidated or volume drops faster than anticipated the a real option to retire rather than accept the transfer.   Both the APWU and the Postal Service would need to jointly work with Congress to show why not fixing the retiree cost issues may prevent the Postal Service from reducing its costs quickly by preventing it from offering realistic early retirement incentives.
• A joint task-force of APWU and postal executives to examine how the two-tiered wage structure could be used to compete with Pitney Bowes and other pre-sorters for sorting mail with type-written addresses.    Given that both pre-sorters and the Postal Service use similar machines to handle sortation, and this mail is significantly less likely to require manual sortation than single-piece mail, a lower wage structure could allow the Postal Service to effectively compete on price for origination sortation.   The primary challenge here is the continued linkage of single-piece mail rates and presorted rates that could prevent the Postal Service from effectively competing for this business.   
• A joint task-force of APWU and Postal Service executives to examine the retail infrastructure with a particular focus on looking at 1) how the Australian model of retail services could improve the financial viability of existing outlets, and 2) developing a new job-category for APWU employees to support a retail infrastructure that includes a combination of corporate owned, franchised, and self-service outlets.    For example, APWU members could provide the staff necessary to run and maintain a network of off-site self service outlets similar to current automated postal centers (APC's).

All three of these ideas are based on information previous prevented in this blog.  They offer opportunities that allow existing APWU members to more easily deal with the transition to a Postal Service that has a smaller footprint as well as create real opportunities for both existing and future APWU members in the competitive postal marketplace. Most likely there are numerous other ideas for easing the transition to a smaller Postal Service footprint or creating new opportunities for APWU members and I look forward to seeing additional ones from introduced in comments to this blog.  

Senator Carper's Bill: D.O.A

Senator Tom Carper introduced a new postal bill, the ‘‘Postal Operations Sustainment and Transformation Act of 2010’’ (The POST Act of 2010), to modify the Postal Service's business model on September 23rd.   The bill includes all of the legislative changes that the Postal Service requested as part of its action plan last March.  The strong support that Postmaster General Potter shows for the bill in the press release from Senator Carper's office confirms that this bill can be thought of as the "Postal Service's bill."

Unfortunately for Postmaster General Potter, Senator Carper's bill is effectively dead on arrival.  Why?

• The bill was introduced at the end of the legislative session.    With both the House and Senate going on recess to campaign, the consideration of the bill will not even begin until after the election.    The bill still will require mark-up in the Senate and then mark-up and passage by the House.   The clock will most likely run out before passage in one house of Congress, let alone two.
  
• The expected Republican gains in the Senate and House will make any lame-duck session particularly contentious and further reduce the chance that any major legislation will pass.   If Republicans gain control of one or more houses in Congress, it is in their interest to make the lame duck session as ineffective as possible forcing legislative actions to be put on hold until the next Congress.
  
• It is easier to stop legislation than to pass it.   The Post Act has a number of provisions that immediately generate opposition.
  
• Provisions in the legislation to fix the retiree benefit issues easily can be opposed in a Tweet describing the fix as a bailout of a failed federal agency.   This is exactly what Congressman Darrell Issa said in his op-ed in the Washington Times.  Given opposition to bailouts of private sector firms, Congress is unlikely to pass any legislation labeled as a "bailout" of a government entity in the press, in the blogosphere, on cable TV news or on talk radio.
  
• Provisions to allow the Postal Service to eliminate Saturday delivery will receive opposition from a majority of Congress. 
  
• Provisions to allow the Postal Service greater flexibility to cut rural post offices will face opposition from primarily the Republican and Blue Dog Democratic members of Congress that represent most of rural America.   While these members are opposed to bailouts, they are also opposed to cutting services to their constituents.
  
• Provisions allowing the Postal Service to expand into new services that use its physical, technological and human capital that are in the public interest will receive opposition from companies that fear competition from the Postal Service.
  
• Provisions calling for a change in labor arbitration decision criteria will have opposition from Postal unions and their supporters in Congress.

Finally, if this bill does not pass this Congress, it is even less likely to pass in its current form in the next.   Republicans will control the agenda on modifying the Postal Service's business model in the next Congress.    Representative Issa, who has already called the Carper bill a bailout, appears likely to chair the committee writing Postal reform legislation in the House.   His bill will likely require significant changes in the business model beyond what the Postal Service has proposed before accepting the need to fix the retiree benefits issues, let alone include any of the other proposals that Senator Carper has included in the Post Act.  When that occurs, all that may remain of the Post Act will be the legislation's title.