BNA Daily Labor Report: IBT, YRC Agree on Wage Cuts, Temporary Pension Suspension

July 16, 2009: The International Brotherhood of Teamsters will begin mailing ballots July 17 to some 40,000 of its members employed by YRC Worldwide Inc. to vote on modifications to the terms of its collective bargaining agreement that call for a cut in gross wages, reductions in employer contributions to health and welfare benefits, and a temporary suspension of the company's pension contribution, the union said in a July 14 statement.

“We are confident this plan balances the need to provide job security while maintaining good quality jobs,” Tyson Johnson, director of the Teamsters National Freight Division, said in a July 14 statement. “This is a tough situation for the company and our members, but we believe this plan protects our members and allows the company to survive the worst freight recession in several generations.”

The union will begin counting ballots Aug. 6. If approved, the modifications to the National Master Freight Agreement would become effective for the first payroll period after ratification and would expire March 31, 2013, the end of the NMFA's term.

IBT reached a tentative agreement with YRCW July 9. The union and company said the modifications would reduce the company's cost structure reduce company costs while protecting IBT members' jobs (130 DLR A-8, 7/10/09).

YRCW, based in Overland, Kan., and IBT June 29 exchanged proposals soon after the company reopened its contract with the union, citing economic reasons (121 DLR A-13, 6/26/09). The agreement would cover 40,000 drivers, dockworkers, clerical employees, and others, at each of YRCW's subsidiaries, including Yellow Transportation, Roadway Express Inc., USF Holland, and the New Penn Motor Express.

“This is another step in our ongoing strategic plan to restore the financial strength of our company,” Bill Zollars, YRCW chairman, president and chief executive officer, said in a July 14 statement. “Modifications to the labor agreement will help us reduce our cost structure, preserve operating capital and increase our competitiveness.”

The company added that the proposed contract modifications would save the company about $45 million per month, beginning immediately upon ratification, and that would grow to about $50 million per month in 2010.

This is the second time in the last year that YRCW and IBT have reopened their contract. Union members Jan. 8 voted to ratify a proposed modification to the NMFA that reduced employees' gross wages and mileage rates by 10 percent and eliminated a cost-of-living adjustment, in exchange for a 15 percent ownership stake in the company (6 DLR A-7, 1/12/09).

Gross Wages Reduced 5 Percent

The modifications to the agreement would reduce gross wages by 5 percent, the union said, a 15 percent total reduction from the terms agreed to in the initial contract ratified in February 2008 ( 28 DLR AA-1, 2/12/08). The initial contract provided for a general wage increase of $2.20 per hour over term for full-time employees and increased employer contributions to health, welfare, and pension funds by $5 per hour worked over the life of the contract. Full-time drivers paid on an hourly basis earn up to $22.15 per hour, according to 2008 union estimates.

Under the proposed modifications, wage and mileage rate increases would also be reduced by 5 percent, down 15 percent from the initial agreement and will take effect April 1, 2010, April 1, 2011, and April 1, 2012.

New hires with a noncommercial driver's license, excluding mechanics, would participate in a revised wage progression under the modifications. During the first year of employment, they would receive 70 percent of wages agreed to in the proposed modifications, 75 percent of wages in the second year, 80 percent in the third year, and 100 percent in the fourth year.

Additionally, new hires who have a commercial driver's license or are mechanics would receive 85 percent of wages in their first year, 90 percent in the second year, 95 percent in the third year, and 100 percent in the fourth year.

Pension Contribution Suspended 18 Months

If ratified, the proposed contract modifications would provide for a “nonpermanent pension contribution termination period” effective July 1, 2009, through Dec. 31, 2010, during which time the company would terminate its participation in the pension funds and make no contributions to the funds, the union said. The company would have paid about $7.60 per hour worked in pension contributions during the first 12 months and $8.20 per hour for the last six months. The company said it would not be required to repay those benefits at a later date. However, at the end of the period, the company would be required to resume its participation in the pension funds, effective Jan. 1, 2011 and make pension contributions.

The agreement also would require the company to reduce the contribution to the health and welfare funds by 20 cents per hour worked starting Aug. 1, 2009, and by 40 cents per hour Aug. 1, 2010. Effective Aug. 1, 2011, and Aug. 1, 2012, the contribution rate to the health, welfare, and pension funds would increase to $1 per hour.

During the temporary suspension of the company's pension contribution, the company also would be prohibited from making any contributions on behalf of nonbargaining unit employees to employer-provided pension funds or to a 401(k) plan.

Stock Option to Buy Up to 20 Percent

A new stock option plan would be established to provide bargaining unit employees with options to purchase an additional 20 percent of the company's outstanding shares of stock. This 20 percent is in addition to the previous 15 percent provided under the prior wage reduction plan, agreed to in January.

The agreement also would prevent the company from purchasing any “nonunion regular route freight entity” without approval of the union and limits the employer's use of savings achieved by the economic relief to expand nonunion worldwide operations, the union said. It also would prohibit the company from transferring bargaining unit work to India or other countries and would return such work that previously was transferred.

Meanwhile, under the proposed modifications, the company also would be required to recognize new organizing rights through card check and neutrality language at both nonunion and partially represented freight companies that YRCW currently operates or may acquire.

The tentative contract also would:

  • allow employees to take a leave of absence without pay during the 18-month temporary pension suspension period;
  • provide additional job security for laid-off bargaining unit employees, extending recall rights from five to 10 years;
  • offer “snap back” protections that would provide wage snap backs to the full NMFA rate if the pension plan is terminated, if the employer files bankruptcy, or if the company is sold; and
  • give the union the right to participate in the selection of a person to serve on the YRCW board of directors.

By Alicia Biggs

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