Resource Center/Article09/12/2022

Independent Contractors, Union Negotiations, & Peak Surcharges, Oh My!

The parcel and LTL markets heat up as peak season looms, carriers focus on the year(s) ahead, and everyone has a role to play.

Parcel Carrier News

  • 8/26: FedEx Ground announced the termination of existing contracts signed with independent contractor Spencer Patton and his companies, including Patton Logistics, after what has been described as a “hostile fight” between the two parties.
    • FedEx says it takes challenges independent contractors face seriously and welcomes renegotiation proposals, citing a 40% approval rating for such renegotiation requests and stating that 90% of all renegotiation proposals since July, 2022, have led to higher contractor payments.
    • Patton has divided the independent contractor market: those that support Patton’s aggressive tactics and believe he is championing change within their market in a positive direction, and those that are angered by the idea Patton’s unsolicited actions are getting between them and their contracts with FedEx.
    • During a public presentation that drew 3,5000 attendees, Patton said he would “cease working with FedEx Ground on or about Nov. 25 – the big shopping day known as “Black Friday” – unless the company helps out his business.”
  • Related: So how does FedEx support independent contractors facing an increasingly complex supply chain (and peak season) without all the resources of their contractor? FedEx points to what it calls “Schedule K” payments, in which independent contractors receive payment in two phases: 1) a payment period between September-November that “provides contractors with funds up front so they can add labor and equipment to manage the upcoming peak-season parcel-delivery spikes”; and 2) a payment period that begins at the beginning of peak season in late November, that “provides contractors with variable compensation tied to specific delivery productivity metrics. The compensation levels are adjusted weekly depending on the unit’s forecasts for peak season volumes.”
  • UPS plans to repeat its 2021 strategy by adding 100,000+ seasonal employees in preparation for this year’s peak season and will expedite the process for 80% of positions via online “quick hire” applications that do not require a formal interview.
    • Full and part-time seasonal positions range from delivery/CDL drivers, package handlers, and driver handlers.
    • The “quick hire” process, from application to offer, takes just 25 minutes (down 5 minutes from last year).
    • Roughly 35,000 of last year’s seasonal hires moved into permanent positions at UPS.
    • Seasonal drivers can expect an average salary of $95,000, with $50,000 in health, wellness, and pension benefits.
  • The UPS pilots’ union “overwhelmingly ratified” a two-year contract extension detailing annual wage increases, improved pension benefits, and ensures continued UPS flight service through Sep. 1, 2025. For those unfamiliar, UPS pilots are currently operating on a contract extension that will expire Sep. 1, 2023. The contract extension received unanimous support from a six-pilot executive board mid-June, but required a majority vote from all UPS pilots to approve.
  • Related: The union representing UPS drivers and package handlers, the Teamsters Union, will begin new contract discussions with the carrier during spring 2023. Their existing labor contract expires end-of-month July, 2023, and the upcoming negotiation has labor analysts worried about a potential strike.
    • What worries them most? UPS distributes an estimated 6% of the nation’s GDP – such a high volume can’t simply be absorbed by another carrier, or carriers, like Amazon, FedEx, and USPS. Such a strike would have serious implications for the already frazzled U.S. supply chain.
    • How many employees do the Teamsters represent at UPS? A majority. CNN estimates of the carrier’s permanent 534,000 global employees, 350,000 UPS drivers and package handlers are Teamsters. Analysts worry about a history of strain between UPS and union members, as well as the Teamsters $300M strike fund.
    • CNN reports: “The union has not gone on strike against UPS since a nearly two-week protest in 1997. If the union does go on strike, it would be the largest strike against a single business in nation’s history.”
  • Less than nine months after announcing plans to purchase 19 Boeing 767 Freighters, the carrier announced it will purchase eight more to support “domestic and international demand for parcel shipping, driven by e-commerce, and fleet replenishment.” More specifically, UPS cited rising demand in healthcare, small business, and international markets as a driving force behind the decision estimated to cost just over $1.7B ($220M/aircraft), though a discount may apply for multiple bulk purchases. The carrier expects to receive the eight new Boeing 767 in 2025, while receiving previously purchased Boeings late 2023.
  • Seeking exemption from two safety requirements, the Federal Motor Carrier Safety Administration (FMCSA) has denied two requests by UPS seeking exemption from two Entry-Level Driver Training (ELDT) requirements: 1) that long-haul training instructors have at least two years of commercial truck driving experience; and 2) the separate registration of the carrier’s individual training facilities within a new FMCSA database. UPS has previously made a similar request, and then and now the FMCSA determined the exemption request “lacked evidence that would ensure that an equivalent level of safety or greater would likely be achieved [absent the exemptions].”

GRI and Surcharges

  • FedEx Canada
    • FedEx Canada announced its 2022 Peak Season surcharges for Express Intra-Canada, Ground Intra-Canada and International, and Residential Delivery. For Express Intra-Canada, Peak Oversize and Peak Additional Handling are effective from October 3, 2022 through January 15, 2023. Peak Residential Delivery is based on a peaking factor and is effective from October 31, 2022 through January 15, 2023. For Ground Intra-Canada and International, the Peak Oversize, Peak Additional Handling and Peak Unauthorized Package are effective from October 3, 2022 through January 15, 2023. The Peak Residential Delivery based on a peaking factor and if effective from October 31, 2022 through January 15, 2023. See all FedEx Canada Peak Surcharges and Fees.
  • OnTrac
    • OnTrac published its Peak Season surcharges for 2022. The peak charges include Large Package ($70), Additional Handling ($6.50), and a Residential Delivery charge that is tiered based on package volume. Large Package and Additional Handling are effective from October 2, 2022 through January 14, 2023. The peak Residential Delivery charge begins October 30, 2022 and runs through January 14, 2023. See all OnTrac Service Updates.
  • Purolator
    • Purolator announced its 2022 Peak Season surcharges. The charges include Peak Additional Handling ($7), Peak Oversized ($7), Peak Residential Heavyweight ($7), Peak Large Package ($60), and Peak Over Maximum Limit ($450). These charges are effective from October 3, 2022 through January 15, 2023. A Peak Residential Area charge runs from November 14, 2022 through January 15, 2023 and is either $0.50 or $1.50, depending on shipping volume. See all Purolator Peak Surcharges.
  • UPS Canada
    • In the updated UPS Canada Service Guide effective September 4, 2022, the Additional Handling surcharge based on weight now applies to packages with an actual weight of more than 50 lbs (22 kg). This only applies to domestic and export packages. The weight rule for imports is still 70 lbs.
  • UPS
    • UPS released its Peak Season surcharges. The charges include Additional Handling ($6.50), Large Package ($70), and Over Maximum Limits ($400). These charges are effective from October 2, 2022 through January 14, 2023. The Peak charges that apply to Air Residential, Ground Residential, and UPS SurePost packages are determined based on volume tiers and are effective from October 30, 2022 until January 14, 2023. Read the announcement.

LTL Carrier News

  • Land Line’s Chuck Robinson says the LTL market is undergoing a “radical transformation”.
    • Robinson points to five recent events hinting at a large shift in the marketplace: 1) Saia LTL Freight’s continued expansion efforts, including a Chicago O’Hare adjacent terminal; 2) multiple acquisition announcements from some of the industry’s heavyweights; 3) attempts to acquire USA Truck and Freymiller; 4) Yellow Corp.’s brand consolidation efforts that kicked off in 2021; and 5) the changing relationship between FedEx Ground and its contractors.
    • Robinson also highlights two key market disruptors identified by Donald Broughton, principal and managing partner at Broughton Capital, LLC:
      • First, a changing customer base with less emphasis on industrial customers shipping primarily B2B.
      • Second, the continuous e-commerce rise, driving more and more residential deliveries into the LTL market.
  • Supply Chain Dive’s Colin Campbell has rounded up comments regarding a range of cost reduction efforts from large LTL carriers during their most recent respective quarterly earnings calls:
    • Old Dominion Freight Line “aims for a fully in-house linehaul operation”;
    • Saia “aims to reduce… purchased transportation”;
    • Yellow Corp aims to blend both of the above approaches, while also reducing “redundancies in the west” while attempting to transform into a “super-regional carrier”;
    • and XPO Logistics aims to reduce “high third party lineal costs”.
  • Logistics Management brands 2022 a “quest for quality” year for the LTL market, summarizing many industry shifts driven by the pandemic: rising demand driven by the e-commerce boom; a more focused, strategic approach to pricing amongst LTL carriers; and a consistent approach from LTL carriers to better control and gain visibility into network capacity. John Schulz, trucking correspondent at Logistics Management, says, “Analysts and carrier executives we’ve interviewed over the past year agree that for the next year or two at least, carriers will have the upper hand in rate negotiations because capacity will remain tight and LTL options will be limited… So, now is the time to engage in those improved shipper/carrier partnerships we’ve been advocating over the years.”
 Written by Cam Elliott
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