Labor Law and Fedex

Running head: Labor Law and FedEx

Labor Law and FedEx

Gary D. Rice

Webster University

Labor Law

Industry wide, revenues topped $70 billion dollars a year in the parcel delivery business, a market that two giants attack with two very different business models. UPS which was founded in 1907 as a messenger company in the United States has grown into a billion dollar corporation. FedEx Corporation was founded in 1971 as the first next day air supplier and today profits are also in the billions.

FedEx, which started as an air transport company but has since expanded to ground service, falls under the Railway Labor Act (RLA), while UPS, which started as a ground service, falls under the National Labor Relations Act (NLRA). In practice, that makes it very hard for FedEx workers to unionize.

Drivers at UPS, FedEx's main rival, and at other, smaller delivery companies can and have voted to form their own Teamster locals in myriad cities across the land, as the National Labor Relations Act (NLRA) permits. Under the RLA, however, the rules for forming unions are very different: The entire nationwide workforce must vote in a single election, and the union must obtain a majority not just of the workers voting but of voters and non-voters combined. (If a comparable rule held for presidential elections, requiring the winner to obtain a majority of the adult population of the United States, it's not clear that this nation would have had a president since -- well, ever.)

When Federal Express was founded in 1971, it was chiefly an air transport company, but it long ago expanded to include ground delivery. Indeed, of its slightly more than 100,000 U.S.-based employees, just 7,700 are pilots and mechanics. It makes sense that those workers fall under the jurisdiction of the RLA. But almost all the rest are drivers and sorters who never come in contact with the company's planes. At UPS and smaller delivery companies, such employees are covered by the NLRA. But not at FedEx; in 1996, as the Senate considered reauthorization for the Federal Aviation Administration, a few words were slipped in allowing FedEx alone to be classed as an express carrier under the jurisdiction of the RLA. This gave FedEx a cost advantage over unionized rivals UPS and DHL and, for that matter, any start-up that might come along. It has also enabled FedEx not only to keep its drivers from unionizing but also to block such attempts by its airline mechanics, who belong under the RLA's jurisdiction.

Ken Eckel, a mechanic and sheet-metal worker at FedEx's main facility in Memphis since 1996, has participated in fellow mechanics' efforts to organize for several years. But under the RLA, the mechanics can't form their own unions locally and can unionize only if a majority of the mechanics everywhere vote to join the union, too. Management, he says, contends that "we're an airline. We started as an airline, but we added trucking. UPS started as a trucking company and then added air. The order doesn't matter. We're both freight companies."

In March the House passed an FAA reauthorization that repeals the loophole under which FedEx won its special standing. The Senate-passed version of the bill contains no such language. Sen. Lamar Alexander, Republican from Tennessee, where FedEx founder and chief executive Fred Smith is a major political donor (chiefly to the GOP), has threatened to block the House bill when it returns to the Senate for final compromise. Teamster officials sound somewhat optimistic that they can get the requisite 60 votes for cloture, but FedEx is doing all it can to stop them. Last year, FedEx announced that it was unlikely to go forward with planned aircraft purchases from Boeing if the act passed -- a clear attempt to sway lawmakers from states and districts with Boeing plants. "We're not threatening Congress," a FedEx spokesman said at the time of the company's threat to Congress.

The battle over FedEx truckers is part of a broader union campaign against the practice of misclassifying workers so that they're not eligible for benefits or able to unionize. Some unions are petitioning the Labor Department to crack down on employers who label permanent full-timers as temporary workers. Because of the 1996 loophole, however, the FedEx war must be fought in Congress.

FedEx argues that the House bill is special-interest legislation to benefit UPS. But it is FedEx that has a special loophole granting it a legal status different from its competitors. Besides, the company would have trouble convincing workers such as Eckel that its campaign to keep the loophole isn't directed just as much, if not more, at him and