UPS or Federal Express? When it comes to a choice of global courier services in the United States, these are the two major options. Choosing between the two may seem like a choice between Coke and Pepsi. The companies do, after all, provide the the same services. Buy something online and it is often a toss-up which of the two home delivery behemoths will arrive at your door with the package.
To many it doesn’t make a difference who trucks their goods to their front punch. But a closer look at the companies would reveal vastly different internal structures. Those structures play a large role in the well-being of employees. Consumers armed with the information about how large companies treat employees can make better-informed decisions about the companies they choose to support. By doing so, consumers can take part in creating a more just world. It is simply the “vote with your dollar” lesson that every student learns in high school civics class.
So how are these two home delivery juggernauts so different? The simplest answer is: Unions. That’s right. UPS drivers and other employees of the company are represented under a collective bargaining agreement between the International Brotherhood of Teamsters and the United Parcel Service. Under the agreement, UPS employees are given a robust pension package. They have a healthcare plan that extends coverage to spouses who don’t have their own employer-based plans. And a driver at UPS can make a healthy $70,000 per year.
By contrast, FedEx drivers are not represented by a union. Many don’t have health insurance plans. There is no company retirement plan (some have 401k plans). And many pay for their own trucks and fuel. Don’t think that is possible? It is. One of the little known facts about FedEx Ground — the part of the company that competes with UPS Ground, the entity that performs home delivery — is that many of the drivers aren’t employees of FedEx at all. They are independent contractors working for themselves; assuming a good deal of risk while Federal Express rakes in huge profits.
FedEx argues that the contractor-based structure helps create small businesses and allows people to work independently. That may be true, but if one of those drivers gets hurt on the job, their contract with the company evaporates. Not only are they not protected by a powerful union that advocates on their behalf, the drivers are not protected by the company’s own employment policies.
That’s not to say that FedEx doesn’t have employees. It does. But none of those employees enjoy union protection either. In fact, Federal Express has a long history of opposing unionization. Founded in 1971, Federal Express has enjoyed huge success. In 1983 the company’s “Manager Labor Law Book” attributed that success to being “union free.” Ten years later the company distributed another booklet to managers with a cover letter that read, “Enclosed you will find a new guide designed to provide Federal Express managers with basic information about union avoidance and union organizing.”
Some may argue that it is the right of the company executives to make such decisions. Or that it is the right of the workers to decide if they should organize. Both are solid arguments. But the history of FedEx and its efforts to avoid unionization are a little more complicated than that.
The truth is, FedEx benefits from its workers coming under the jurisdiction of the Railway Labor Act (RLA). That is a piece of legislation that dates back to 1926 and was put in place to prevent disgruntled railway workers in one city staging a work stoppage and shutting down the nation’s entire rail system. The law has since been expanded to cover the airline industries, and because FedEx was first founded as an air transport company (long before adding ground service), it has always been governed by the old legislation.
UPS, on the other hand, was a trucking company long before it ever added a fleet of planes. Consequently, the company with the brown trucks — and almost every other delivery company in the U.S. — is governed by the National Labor Relations Act (NLRA), under which it is much easier for workers to organize.
The last time this came up was 2009 and 2010, when some FAA legislation was bouncing around Congress that threatened to repeal the loophole that kept FedEx under the RLA. During that time FedEx threatened to cancel a $7.5 billion order of Boeing aircraft if the legislation passed. It also beefed up its spending, doling out $42 million on lobbying in those two years compared to $14.4 million spent during 2007 and 2008.
FedEx claimed the legislation was backed by UPS, whose goal it was to cripple them by saddling them with a union. If that was the case, UPS wasn’t trying very hard. The company only spent $14 million during the years the legislative battle occurred. The Teamsters only spent $2.5 million. In the end FedEx escaped the tentacles of the NLRA.
FedEx’s attempt to play the victim card might have been easier to take if they were on top of their game. But UPS had long dominated the U.S. market. The company has been around since 1907 and raked in $53.105 billion in revenue in 2011. (Side by side, year for year statistics are difficult to come by.) That was compared to $42.7 billion in revenue for FedEx in 2012. That’s two years after FedEx defeated the threatened legislation. The company was also more nimble, with over 100,00 fewer employees than UPS (remember the contractor truck drivers).
Yet, despite the powerful union, UPS remained more profitable. UPS retained seven percent of revenue as net income versus FedEx’s four percent. With those kinds of numbers, what would be UPS’ motive to back the legislation?
But more importantly a close look at the numbers and performance reveals that UPS has not been burdened at all by its union relationship. It outperforms FedEx in many ways, including profitability, while maintaining a wage and retirement package that provides a decent standard of living for its employees. The Teamsters have staged only one strike, in 1997, during the long relationship. That’s a pretty strong case for union-corporate partnership.
There is no clear winner between the companies when it comes to service. Some prefer FedEx, while others swear by the brown trucks. Both companies got their fair share of bad press during Christmas of 2013. Both seemed plagued by logistics snarls that prevented many people from getting gifts on time. Indeed, service may be the only place where the Coke and Pepsi comparison is apt. But consumers would do well to look into what kind of company they are supporting next time they go to ship a package.