United Parcel Service has notified the Teamsters union that it will withdraw its $150,000 buyout program for parcel and linehaul drivers in 13 central states in response to strong protests from local union chiefs, complicating the company’s effort to eliminate 30,000 jobs as it downsizes its network amid a reduction in parcel volume.
The International Brotherhood of Teamsters, which represents about 340,000 drivers and package handlers, contends that the voluntary separation agreements violate the September 2023 national contract because they undermine employment security guarantees and represent direct dealing by management with workers over changes to contract terms. A federal judge in February denied a request to block UPS (NYSE: UPS) from implementing the Driver Choice program.
UPS has decided to pull its buyout offer in 13 states after 37 local unions in the Central Region filed grievances, through an approved process in the contract, demanding to be excluded from the program, the Teamsters said in a news release on Tuesday.
The Teamsters Central Region stretches from Nebraska to Ohio and is home to more than 68,000 UPS employees. It’s not clear how many in that group are drivers, but warehouse workers make up the majority. The Central Region is governed by a supplemental rider to the national master agreement. The Teamsters claim the regional supplement restricts UPS from directly offering incentive programs that are not voted on and approved by employees and the union.
Under the Driver Choice program, UPS is offering a lump-sum payout of $150,000, regardless of seniority, in exchange for resigning and committing never to work for the company again. About 105,000 drivers were eligible for the plan, but that number will now be less after the offer is pulled from the Central Region. UPS offered an incentive last fall to encourage driver departures, but the program was far less lucrative and based on tenure. Only 3,000 drivers accepted the deal.
“Teamster local unions in the Central Region have raised strong opposition to the Driver Choice Program and have demanded that UPS not offer the DCP to drivers. We do not agree with the union’s position. We believe the DCP complies with our contract, and it has been well-received by our U.S. drivers around the country,” UPS said in an emailed statement.
The Atlanta-based company has not directly communicated with workers about dropping the buyout program in the Central Region, but is expected to do so soon. Employees who previously applied for voluntary separation will be told they are no longer eligible for the incentive.
UPS began informing package van and tractor-trailer drivers in late February about Driver Choice and expects to finalize separation agreements by late April.
Management has not provided an update on how many drivers have accepted the buyout so far, but Chief Financial Officer Brian Dykes said at a Raymond James investor conference earlier this that “we’re seeing good take rates so far.”
Buyouts are a way to accelerate planned job cuts because senior union workers are basically guaranteed jobs. When positions are eliminated, less-tenured workers leave and drivers can move into warehouse jobs while still retaining their wage rate and benefits.
The Teamsters say grievances against the 2025 voluntary separation program are scheduled to be heard by an arbitrator in May.
The UPS network restructuring involves the closure of nearly 120 facilities, a workforce reduction of 64,000 full-time employees, and a reduction of 50 million operating hours over two years. Management has said it expects to eliminate $3 billion in structural costs from the initiative, which was sparked by a decision to shed half of its business with Amazon because it is not profitable.
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Write to Eric Kulisch at ekulisch@freightwaves.com.
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