UPS saga continues: how many local agreements are considered ratified?

On the first business day after the ratification/non-ratification of the UPS (NYSE: UPS) master agreement covering its Small Package division, the dust still had not completely settled.

In particular, a new wrinkle surrounding local issues, and the need to have them approved, came from a statement made by the dissident Teamsters for a Democratic Union.

A spokesman for UPS said Monday that the company planned to sit down with union negotiators to discuss local issues at the 10 local/regional units that had rejected the union.

But whether it’s necessary to talk about 10 separate agreements is unclear, based on a web posting by the TDU.

“(UPS negotiator Denis) Taylor told a conference call of the National Negotiating Committee on Sunday that he would apply his interpretation of the two-thirds rules to ratify Supplements that were rejected by the members,” the TDU said in the blog post. According to the TDU, Taylor said the local supplements to the master agreement were ratified for the Central Supplement, Atlantic Supplement, Northern California Supplement, Louisville Air Rider and the Detroit Rider.

These supplements reportedly failed to receive 50% of the vote while failing to meet minimum turnout standards, and so the negotiated provisions go into force. That is the similar to the rationale the union said late last week was the reason why the master agreement was ratified even though it failed to receive more than 50% of the vote.

But according to the TDU’s comments about what Taylor said, five supplements were rejected because they had more than 50% vote no and/or met minimum turnout standards: Local 804 Supplement, Upstate New York Supplement, the TCI Supplement, Western Pennsylvania Supplement, and Central Pennsylvania Supplement.

A spokeswoman for the Teamsters declined comment. As for UPS, a spokesman late Monday afternoon said it was not aware that Taylor had declared some of the local agreements valid.

The UPS statement over the weekend was its third in two days on the same subject. The first expressed disappointment that the rank-and-file had rejected the master agreement and gave no indication that the company believed there was a road to ratification with less than 50% voting yes. The second acknowledged that the union had declared the contract ratified due to provisions in the Teamsters constitution, even though it failed to get 50% of the vote; and the third discussed implementing the agreement “as soon as remaining local and supplemental agreements are ratified,” although Monday’s developments indicated that the full extent of what needs to be negotiated is unclear.

The most recent contract expired at the end of July, but extensions have been in place. UPS’ weekend statement said those extensions are continuing and it reiterated that it is “business as usual” at the company.

If there was any investor reaction to the less-than-majority ratification, it wasn’t clearly visible. UPS stock traded stronger than the broader market for most of Monday but not significantly. At approximately 2:20 p.m., UPS stock was down less than one-tenth of one percent, while the broader S&P 500 was down slightly more.

The biggest issue, according to Stephens analyst Jack Atkins, is that a contract that failed to secure a majority vote but ratified anyway is going to stick in the craw of members who voted no, thought they were on the winning side and found themselves under the pact anyway.

“We have seen reports and heard anecdotes that UPS employees, particularly those that voted against the Package contract are outraged that the union would ratify the contract despite the ‘No’ vote,” Atkins wrote in a report to investors. “A ‘no strike’ clause does not prevent work slowdowns, elevated call outs for sick days or the utilization of work rules to disrupt operations in an effort to demonstrate displeasure with the outcome.”

Given that, it’s possible some other companies could benefit. “We would also anticipate that some shippers could look to divert some freight to other operators to avoid potential issues during peak (season),” Atkins wrote.

It all adds up to a holiday season “layer of uncertainty,” Atkins wrote.

A similar sentiment was expressed by Bank of America Merrill Lynch’s Ken Hoexter. “While some investors might be relieved that UPS can now move forward with the agreement as it stands, we view the vote result as an incremental risk, as it reflects worker discontent and the ongoing strain of labor relations at the company,” he wrote to investors.

UPS and the Teamsters will need to renegotiate a contract for UPS Freight. That contract was defeated by the union.