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UPS is offering voluntary buyouts to unionized delivery drivers to reduce its workforce, aligning with its "Network of the Future" plan to downsize its domestic ground network and reduce reliance on Amazon business.

This plan, involving closing sortation centers and increasing automation, aims to cut costs and improve profits, but is met with strong opposition from the Teamsters Union who view it as a violation of their contract guaranteeing job creation.

The Teamsters union alleges that UPS's actions violate their contract by failing to create the agreed-upon number of jobs and are urging members to reject the buyout offer.

UPS aims to save over $1.2 billion through workforce reductions and cost-cutting measures, while the Teamsters are prepared to fight the buyout program and push for UPS to fulfill its contractual obligations.

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UPS plans to offer voluntary buyouts to unionized delivery drivers for the first time in its history as it looks to align the workforce with the downsizing of its domestic ground network and Amazon business.

The news follows management’s disclosure in April of intentions to eliminate 20,000 front-line positions as part of a broader effort to cut excess capacity and improve profits. UPS’s (NYSE: UPS) network optimization plan, called Network of the Future, envisions closing 200 sortation centers over five years and increasing automation for handling packages. Dozens of facilities have already been consolidated in the past year.

Package drivers would “receive a generous financial package if they choose to leave UPS” on top of earned retirement benefits, including pension and healthcare, the parcel freight company said in a statement Thursday. “As we navigate an unprecedented business landscape, we are executing the largest network reconfiguration in UPS history” and need to similarly adjust headcount, the company explained.

Parcel volumes are under pressure from a variety of headwinds, including Trump administration tariffs that have slowed imports and a January decision to reduce Amazon business by 50% over 18 months because so much of it is unprofitable.

UPS’s voluntary severance plan angered the Teamsters union, which says the Atlanta-based company is obligated to create 30,000 jobs under a five-year contract ratified in August 2023, which forestalled a nationwide strike. It urged members to reject the buyout offer.

“UPS is trying to weasel its way out of creating good union jobs here in America by dangling insulting buyouts in front of Teamsters drivers. It is an illegal violation of our national contract,” said Teamsters President Sean O’Brien in a news release. “UPS is obligated to establish tens of thousands of new full-time jobs under the agreement. But CEO Carol Tomé and UPS’s corporate managers are hoping that if they offer paltry severance packages to enough workers, no one will notice the company is setting the union’s contract on fire. UPS Teamsters work too damn hard to be treated with such disrespect.”

Teamster contracts enable UPS drivers employed 30 years or more to receive employer-paid health care throughout retirement, a benefit that would not be guaranteed to all workers under UPS’s severance plan, according to the union. The current contract calls for UPS to elevate 22,500 part-time workers to full-time positions and create another 7,500 positions. 

“We have approached the Teamsters on this topic and remain committed to the agreements we reached in 2023,” UPS said. 

The Teamsters, which represents 340,000 UPS workers, last week accused UPS of failing to comply with the hiring requirement and a commitment to provide 28,000 air conditioned package cars and vans for heat relief in many parts of the country. It requested data from UPS on the status of open positions, as well as the delivery rate for vehicles equipped with air conditioning. The Teamsters gave the company until July 1 to provide answers, but the company has requested additional time to respond, the union said. 

“Our members cannot be bought off and we will not allow them to be sold out. The Teamsters are prepared to fight UPS on every front with every available resource to shut down this illegal buyout program,” O’Brien said. “UPS needs to live up to the existing contract. They must honor their commitments, just as Teamsters do every day, reliably delivering packages to hundreds of millions of Americans. Profits are not more important than people, not at UPS or any other employer.”

UPS executives said during April’s earnings presentation that the company expects to save more than $1.2 billion this year by eliminating 25 million operating hours across the workforce. A similar amount in semi-variable cost reductions are estimated from the reduction of 20,000 employees. 

Click here for more FreightWaves/PostalMag stories by Eric Kulisch.

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Eric Kulisch

Eric is the Supply Chain and Air Cargo Editor at FreightWaves. An award-winning business journalist with extensive experience covering the logistics sector, Eric spent nearly two years as the Washington, D.C., correspondent for Automotive News, where he focused on regulatory and policy issues surrounding autonomous vehicles, mobility, fuel economy and safety. He has won two regional Gold Medals and a Silver Medal from the American Society of Business Publication Editors for government and trade coverage, and news analysis. He was voted best for feature writing and commentary in the Trade/Newsletter category by the D.C. Chapter of the Society of Professional Journalists. He was runner up for News Journalist and Supply Chain Journalist of the Year in the Seahorse Freight Association's 2024 journalism award competition. In December 2022, Eric was voted runner up for Air Cargo Journalist. He won the group's Environmental Journalist of the Year award in 2014 and was the 2013 Supply Chain Journalist of the Year. As associate editor at American Shipper Magazine for more than a decade, he wrote about trade, freight transportation and supply chains. He has appeared on Marketplace, ABC News and National Public Radio to talk about logistics issues in the news. Eric is based in Vancouver, Washington. He can be reached for comments and tips at ekulisch@freightwaves.com