By Lisa Baertlein and Priyamvada C
(Reuters) - U.S. workers at United Parcel Service (NYSE:UPS) have ratified a new five-year contract, the Teamsters union said on Tuesday, closing the door on a potential strike that could have put timely Christmas deliveries in doubt and sent shipping costs soaring.
The deal raises pay and eliminates a two-tier wage system for drivers at Atlanta-based UPS, the world's largest package delivery company, which handles about a quarter of U.S. parcel deliveries and serves virtually every city and town in the nation. It also provides another paid holiday, ends forced overtime and adds air conditioning to new models of the company's ubiquitous brown trucks starting next year.
An overwhelming 86.3% of voting members chose to ratify the agreement that covers UPS workers in the U.S., of which there are about 340,000, according to the International Brotherhood of Teamsters.
"The agreement passed by the highest vote for a contract in the history of the Teamsters at UPS," the union said. The Teamsters did not say what percentage of members voted.
General wage increases for part-time workers double the amount obtained in the previous UPS Teamsters contract - and existing part-time workers receive a 48% average total wage bump, addressing a key sticking point in talks, the union said.
Under the contract deal, current full- and part-time workers will get $2.75 more per hour in 2023, and $7.50 more per hour over the length of the contract, according to the Teamsters.
Ending seniority-based wage tiers that pay new hires less than veteran workers is also a central issue for the UAW-Detroit Three labor talks. UPS is the nation's largest private-sector employer of unionized workers and ending the labor cost-saving scheme there could be a big win for unions and a possible blow to companies.
Meanwhile, Teamsters General President Sean M. O'Brien has made no secret of his plan to use the UPS deal as a recruiting tool - especially for warehouse workers at Amazon.com (NASDAQ:AMZN), the biggest customer at UPS.
"Teamsters have set a new standard and raised the bar for pay, benefits, and working conditions in the package delivery industry. This is the template for how workers should be paid and protected nationwide, and nonunion companies like Amazon better pay attention," O'Brien said.
Unions representing "essential" transportation workers including pilots, port workers and delivery drivers are enjoying enhanced bargaining power due to the tight labor market and stronger public support for unions.
In July, pilots at UPS rival FedEx (NYSE:FDX) rejected their tentative contract.
UPS cut its full-year revenue and profitability targets earlier this month, citing higher-than-expected labor costs and business lost during the tumultuous contract talks with the Teamsters.
The company said all local supplemental agreements also have been ratified except one, which will be finalized shortly. Voting results for agreements covering UPS employees under locals 705 and 710 are expected soon.