Dive Brief:

• A master contract covering about 250,000 UPS small parcel employees represented by the International Brotherhood of Teamsters took effect Monday, after workers ratified the final remaining local agreement Sunday. The contract will be applied retroactively to run from Aug. 1, 2018 through July 31, 2023.  
• The agreement includes a wage increase of $4.15 per hour for full-time and part-time workers (also applied retroactively). "The company has been notified of the ratification and will attempt to implement required raises during the next weekly pay period," the Teamsters said in a statement.
• The contract also requires UPS to create 5,000 new jobs, including at least 2,000 Article 43 driver jobs, which covers premium services. 

Dive Insight:

"We realize this has been a long process, and we appreciate our members' patience and support," Denis Taylor, co-chair of the national negotiating committee and director of the Teamsters Package Division, said in a statement. 

Negotiations between the union and UPS started long before July 31, 2018, the date of expiration of the previous five-year contract. Reaching an agreement was not only a long process but also a contentious one.

Teamsters ratified the master contract last October, despite more union members voting against the deal than for it. Under union rules, when fewer than half of members turn out to vote, two-thirds of them must reject the deal. Only 44% of members participated in the ratification referendum, but among them, they did not reject the deal with a two-thirds majority. 

Following the ratification, the contract would take effect once locals voted on supplements, the last of which was Local 243, based near Detroit. 

One of the contentious issues at the bargaining table was the implementation of technology in UPS operations. The new contract requires UPS to give the Teamsters six months notice of any company plans to integrate emerging tech, such as drones, driverless vehicles or truck platooning. The agreement does not, however, give veto power to the union.

"We're not opposed to new technology," Taylor told reporters on a call last July as negotiations were ongoing. "What we're opposed to is the unilateral implementation of this policy without any input from our folks."

Technology is high on the priority list for UPS as it undergoes a three-year, $20 billion transformation to automate more of its network. Chief Information and Engineering Officer Juan Perez called 2019 "a year of investments" for UPS.

The investments, while expected to benefit UPS in the long run, come with high up-front costs, which hit the 3PL's profits in Q1. The ratification of the contract and requirement to increase pay for workers retroactively to Aug. 1 may result in further financial strain for UPS.

Implementation of the contract does guarantee a level of security for UPS for the next four years. "This agreement, and the previously negotiated master agreement covering UPS Freight employees, helps to ensure that UPS and our employees are well positioned for success in the coming years," Teri McClure, UPS chief human resources officer and senior vice president of labor, said in a statement.

UPS Freight halted pickups last year in anticipation of a worker strike. The company and union were able to reach an agreement, avoiding a strike but still resulting in a disruption to operations.