UPS Inc. wants to create an integrated over-the-road network where longer-haul driving would be performed by workers at its package, less-than-truckload (LTL), and local cartage divisions. This move could streamline the transport and logistics giant's operating network but some in the Teamsters union fear it could lead to more subcontracting of unionized driver jobs.

The proposal was presented by Atlanta-based UPS to the Teamsters in November during contract negotiations to reach a new collective bargaining agreement. The proposal recommends commingling drivers at UPS' small-package operation, its UPS Freight LTL unit, and its cartage operation, according to a communiqué from the Teamsters for a Democratic Union (TDU), a Teamster dissident group that frequently clashes with union leadership.

In a communiqué first published in November, TDU said the UPS proposal "would pit Teamster drivers who make different wage rates against each other and open the door to subcontracting that would be impossible to police." Neither UPS nor the Teamsters would comment.

Ken Paff, national organizer for TDU, said in an interview yesterday that UPS already subcontracts about half of UPS Freight's driving duties and subcontracts over-the-road service for the much-larger small-package unit, although not as much.

An integration of a ground network the size and complexity of UPS' would be a tricky task, but it could help the company lower its labor costs if UPS Freight drivers do more of the work. According to Paff, although driver wages at UPS' package and LTL divisions are roughly comparable, UPS Freight drivers make, on average, $10 less per hour in benefits than their brethren who work on the package side.

The broad issue of subcontracting is likely to be one of the main themes of the negotiations, which began Sept. 27 in Washington, D.C., to craft the nation's largest collective-bargaining agreement covering about 250,000 UPS employees. The current contract, agreed to at the end of 2007, expires July 31. However, both sides are seeking to come to terms well before then.

For example, the Teamsters have grumbled that UPS' SurePost program, where it tenders parcels to the U.S. Postal Service for "last-mile" delivery from the local post office to destination, robs Teamster drivers of work. The program, designed for e-commerce shipments from online merchants to residences, is an inexpensive way for merchants to reach the largest number of residential addresses with orders for on-line merchandise. The model has gained enormous traction in recent years, mirroring the rise of e-commerce.

Ken Hall, who heads the Teamsters' negotiating team, wants UPS to propose language that would protect Teamsters jobs in return for the union's continued cooperation with the program. Paff said that much of the work is done by low-paid sorters and loaders who build pallets each containing hundreds of packages for delivery by UPS drivers to the closest local post office. He said the union doesn't want to end the program but have more of a role in the transportation component of it.

While SurePost is a relatively low-margin business for UPS, it has become a significant revenue-producer due to its volumes.