FedEx and UPS Feud Over Union Rules

The country's two largest private package-delivery companies, UPS and FedEx, have their horns locked in battle on Capitol Hill over the patchwork of laws that determine the rights workers have to form unions. For months, the two companies have been pleading their cases to lawmakers and in public advertising campaigns, hoping to sway favor on the issue of a seemingly minor regulatory change with major implications for the shipping businesses.

It stems from a historical quirk of the law. The 102-year-old UPS began as a trucking company and falls under the National Labor Relations Act, which allows local groups of workers to form unions. FedEx, founded in 1971, was classified for labor purposes under the 1926 National Railway Act because of its focus on air freight. The railway act, which also covers airlines, aims to minimize the impact of local strikes on national infrastructure and makes unionizing more difficult.

Whatever their origins, both companies now boast extensive networks of airplanes, shipping hubs, and delivery trucks. But the labor classification has made it far easier for UPS workers to unionize than their counterparts at FedEx. More than half of the 415,000-member UPS workforce is unionized, primarily with the Teamsters. FedEx has 280,000 workers, and only 5,000, all airplane pilots, are unionized. Keeping the Teamsters out means that FedEx has lower overhead than UPS and can brag to customers that it hasn't had a strike in 38 years, critics say.

In May, the House passed a reauthori-zation bill for the Federal Aviation Administration. The measure reclassified FedEx workers under the NLRA. UPS and unions cheered, and FedEx scrambled. Both sides doubled down on their lobbying budgets.

FedEx launched an aggressive marketing campaign branding the rule change a "bailout" for UPS. The use of the loaded term was controversial, since the rule change involved no government spending (and UPS isn't struggling financially anyway). "This is a piece of legislation written by UPS, for UPS, and only benefiting UPS. That's a bailout, and Americans are sick of it," says Maury Lane, the head of corporate communications for FedEx. "We are two great companies. Let us continue to compete without the government stepping in on behalf of one of us."

For its part, UPS says that different rules applied to workers doing the same jobs are inherently anticompetitive. "We're just looking for the same rules of the road. A trucker is a trucker is a trucker," says Malcolm Berkley, a UPS spokesman. He says that the FedEx decision to brand the rule change a bailout will backfire. "This rule change doesn't cost the government a single dime. It is simply correcting the application of the law."

At the moment, the Senate version of the FAA reauthorization bill is stalled in the Senate Finance Committee, where it's likely to remain at least until after Christmas. But the measure doesn't contain the FedEx labor provision. There simply wasn't sufficient support among senators, says one senior Democratic staffer. If the legislation gets out of committee and is passed by the full chamber, it will head to a reconciliation committee, where negotiators from the House and Senate will hammer out the final legal language on the standing of FedEx workers behind closed doors.

• See a gallery of political cartoons.

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