Why the New UPS Contract Won't Make Its Chief Competitor Follow Suit

FedEx Ground doesn't have a union. Technically, it doesn't even have drivers.

What if it doesn’t absolutely, positively have to be there overnight?

The two biggest package-delivery services in the United States are United Parcel Service (UPS) and Federal Express (FedEx). UPS drivers, who just won a five-year contract (pending ratification) with substantial pay increases, are represented by the Teamsters, and have been since the 1930s. FedEx drivers (unlike its airline pilots) are non-union. Between 2014 and 2018, a report by the Economic Policy Institute found, FedEx spent $837,000 on union-avoidance consultants. The new UPS contract is the largest private-sector collective bargaining agreement in the United States. FedEx has used that fact to persuade the drivers on its payroll not to unionize. “If you’re competing for the same customers as UPS,” a union-busting video says, “and there’s a problem, who do you think the Teamsters are going to support?” Never mind that unions like the United Auto Workers have no problem representing multiple automobile companies that compete against one another.

FedEx has been assisted in its efforts to keep unions out by the 1926 Railway Labor Act (RLA), the same law that Congress used this past November to impose a contract on rail workers who had previously rejected it. The RLA effectively makes it impossible for FedEx drivers to strike without permission from federal mediators. This protection was imperiled in 1995 when Congress voted to eliminate the Interstate Commerce Commission (ICC), because the RLA depended on wording in the enabling legislation for the ICC to define who was covered by the RLA and who wasn’t. FedEx promptly got Senator Ernest Hollings, Democrat of South Carolina and ranking member of the Senate Committee on Commerce, Science, and Transportation, to push through a “technical correction” to maintain FedEx’s special protection from labor organizing.

That infuriated UPS, which had tried and failed in court to argue that it, too, should be covered by the Railway Labor Act rather than the 1935 National Labor Relations Act (NLRA), which subjects UPS to stricter oversight on labor matters by the National Labor Relations Board. The courts ruled that UPS was governed by the NLRA because it shipped packages by truck, but that FedEx was governed by the RLA because it flew packages by air. Never mind that both companies used both airplanes (UPS commands a fleet of 500) and trucks to deliver packages.

A couple of years after Congress reinstated FedEx’s protection against pesky labor organizing, FedEx created a subsidiary, FedEx Ground, to compete more directly with UPS. This time FedEx eliminated any possibility that its drivers would unionize by keeping drivers off the payroll. Instead, FedEx Ground disguises as employees gig-worker drivers and contractor employees, putting them in uniforms and trucks that bear FedEx’s logo but not actually giving these workers Social Security, unemployment, or any other benefits that a company must by law furnish any employee. FedEx Ground doesn’t even have to pay its drivers minimum wage. And now FedEx is preparing to merge FedEx Ground with its overnight service (which since 1998 has gone by the awkward retronym “FedEx Express”), which will probably mean shedding overnight-service drivers, too. Because, really, employing people just gets in the way of serving your true constituency, the stockholders.

This is the company that UPS must now compete against with a generous new union contract. You can read more about this in my latest New Republic column.