Last month, Teamsters received news from Yellow, one of the leading trucking companies in America that the company would be facing a financial crisis by August. In order to prevent its downfall, Yellow’s executives demanded that Teamsters, the union representing 22,000 employees at Yellow, agree to operational changes previously approved by the union.

How did Teamsters General President Sean O’Brien respond to this ultimatum? With a resolute message: Go ahead and shut down.

“It is not left for the Teamsters to save this company; we have given enough,” O’Brien said in a June 12 video statement. “What happens next is out of our control.”

Union leaders are often skeptical of companies claiming financial strain. However, O’Brien’s recent statement has shocked those in the trucking industry. Yellow Corp. could actually go bankrupt, resulting in the loss of numerous unionized trucking jobs. This is a company that has narrowly avoided bankruptcy on multiple occasions.

Furthermore, it is unlikely that another union trucking firm will step in to hire the 22,000 affected workers. The number of union jobs in the freight sector has significantly decreased over the years, making them increasingly scarce.

At first glance, it may seem puzzling why O’Brien would let the company shut down without attempting to save the Teamsters jobs. One would assume that any union job is better than none. However, labor experts argue that this decision is not surprising. It signals a shift in the mindset of union leaders like O’Brien and Shawn Fain. They now proudly embrace a more militant approach and refuse to tolerate subpar employment opportunities.

Overall, this shift in union leadership reflects a new era where rhetoric is strong and only jobs that meet the Teamsters’ standards will be accepted.

“There’s a generational shift that’s going on in labor,” said labor and employment lawyer Benjamin Dictor, who counts among his clients Teamsters Local 804, which represents UPS workers and others in the New York City area.

Dictor, emphasized that trucking fleets consider fuel prices as a fixed cost and that labor costs should also be seen as non-negotiable.

“These companies for generations have treated labor as the cost that they can extract their profit from when other costs are more rigid and higher,” Dictor said. “When those costs go up, they look to labor to come down, so that way they can satisfy their investors. One of the things that you’re hearing from Sean O’Brien is that that’s not the case. Some aspects of labor are a fixed cost. If you can’t afford gasoline, you better get the f— out of the trucking business. I think you hear Sean O’Brien saying that if you can’t afford the labor costs, you better get the f— out of the trucking business.”

This summer, it’s not just Yellow that’s clashing with the Teamsters. UPS, one of the largest freight companies in the world, is also engaged in intense negotiations with the union for a new five-year contract. With the current contract set to expire on July 31, UPS employees have even voted to strike if a new agreement can’t be reached.

One key factor that sets Yellow and UPS apart is their financial situations. UPS, with its massive financial resources, has more leverage to secure a favorable contract for its 340,000 employees. In the years 2021 and 2022 alone, UPS reported an impressive net income of $24.3 billion. In contrast, Yellow faced significant losses of around $87.3 million during the same period.

Michael Duff, an expert in labor law, believes that O’Brien would not adopt such a nonchalant attitude if it did not align with the will of the bargaining unit.

“There is a large sense among rank-and-file unionists that they’re simply not going to take it anymore,” Duff said, speaking generally about unionized labor. “Part of what’s going on here is you’ve got people like O’Brien, who are not willing to cooperate in the old way given the urgency of the moment.”

Yellow bankruptcy not set in stone, but more likely without union support

Yellow has overcome various financial challenges in the past 15 years, including a major one in 2009 when they successfully converted a significant amount of debt into company equity. This debt-for-equity swap was approved by the Securities and Exchange Commission and facilitated by the efforts of the Teamsters and lenders.

During the Great Recession, the Teamsters agreed to a 15% wage reduction and waived pension contributions for five years to help Yellow stay afloat. These wage concessions were later extended in the 2014 contract to ensure the company’s survival.

In 2019, Teamsters-represented employees at Yellow secured an 18% wage increase through their contract, a provision that remains in effect today.

The support of both the Teamsters and the federal government played a vital role in Yellow obtaining a $700 million loan from the U.S. Treasury in 2020. However, it seems that Yellow no longer enjoys the same level of support from these entities, which exposes the company to potential bankruptcy.

According to the Teamsters, Yellow has been benefiting from significant wage, pension, and work rule concessions since 2010. If the Teamsters approve the network changes, Yellow employees will receive a $1.77 hourly wage increase, as stated by a Yellow spokesperson.

Neither Jindel nor Chan expect the federal government to intervene and bail out Yellow, nor has the trucking company made any such request. Yellow did, however, reach out to the White House on June 30, urging President Joe Biden to bring the Teamsters to the negotiating table.

“O’Brien does have a point — the Yellow Teamsters have progressively and consistently given up a lot,” Chan said. “At a certain point, it does have to stop. But is a full blown shut down the answer? It’s probably not one that ultimately works out in the best interest of membership.”

Is an imperfect union job better than no union job? That’s the question that’s been on the minds of many in the trucking industry and Dictor suggests that it’s time to reconsider this question.

“It’s like if I told you that the only way that Yellow could stay in business is that they didn’t have brake pads,” Dictor said. “If they couldn’t have those things, should we give up all these trucking jobs simply because they couldn’t operate safely? We would say no, obviously, we need trucks on the road that are operating safely. It’s for our sake, it’s for everybody else’s sake; there are certain costs.

“If that’s what the brake pads cost, that’s what the brake pads cost,” he added. “And if you can’t afford the brake pad, you know, get the f— out of the industry. The same thing is true about labor. We have to stop thinking about labor like it’s something that there can be a compromise on. … If you can’t afford the labor at a cost that allows these human beings behind the wheel of these trucks to live lives where they get to appreciate their families and their life outside of work and be human beings, then get the f— out of the trucking business.”

Source: Yahoo Finance