Union’s ‘no vote’ on contract proposal reflects strong negotiating hand, stirs shipper fears of strike
Unionized mail carriers at Canada Post have overwhelmingly voted to reject the company’s latest contract offer, raising questions about the potential for a strike or lockout that could further undermine delivery service and whether the government considers the troubled organization too big to fail.
The result was expected by some experts who said front-line workers feel they have the upper hand because Canada Post is state-owned and has a universal service obligation.
“The union believes, probably correctly, that at least for the foreseeable future, the government will continue to backstop any losses, so why would you take that offer?” said Eric Miller, president of cross-border government relations consultancy Rideau Potomac Strategy Group and a former industrial policy official in the Canadian government.
Left unresolved is the core issue of how to run a universal mail service in an age of highly capable private carriers that are taking a bigger share of the nearly $17 billion Canadian parcel market. The government-owned postal operator is looking to a new labor deal as the permission structure for modernizing an outdated business model, with the goal of turning around its finances and improving service for residents and businesses.
Canada Post’s “final” offer was turned down by nearly 70% of Canadian Union of Postal Workers (CUPW) participants in the referendum, according to the Canada Industrial Relations Board on Friday. About 81% of the union’s 55,000 members cast ballots. The offer included a 13% wage hike and better cost-of-living adjustments over four years, but also would have allowed the use of part-time workers Canada Post said are necessary to provide parcel service seven-days a week, as well as more flexibility setting routes and spreading daily loads between mail carriers.
With the rejection of Canada Post’s take-it-or-leave it proposal, Canadians and cross-border shippers face heightened delivery uncertainty as the labor dispute enters its 21st month, yo-yoing in and out of strike risk when service is already slower because of CUPW’s refusal in May to work overtime hours.
Canada Post, which convinced the Canadian government to impose a vote after CUPW leaders turned down its last proposal, said it is evaluating next steps.
CUPW worked hard to influence a “no” vote.
“It’s time for Canada Post to come back to the bargaining table and start seriously negotiating. With these votes behind us, Canada Post must now recognize that the only way forward is to negotiate ratifiable collective agreements that meet postal workers’ needs. The time for games is over,” CUPW President Jan Simpson said in a statement. “Our negotiators are ready to get back to work right away. We’re committed to staying at the table until we’ve reached a deal. We expect the same from Canada Post. And we’re calling on the government to prove to postal workers that it really respects the collective bargaining process, like it says it does. If the Government truly respects unions and collective bargaining, it will keep out. No more back to work orders. No more forced votes.”
Unions typically see their job as protecting jobs and benefits at all costs, not making employers more competitive. CUPW appears even more emboldened to take a hard line because Canada Post is a quasi-private entity.
“I think the implicit assumption of the union is that when push comes to shove, the government will continue to cover losses at Canada Post. And so they’re focused on trying to maximize their benefits. They want the traditional model with defined benefit pension and wages,” said Miller in a phone interview from his office in Washington.
“The expectation is that rejecting the contract does not lead to long term workforce reductions or any serious consequence, and that the government will ultimately subsidize the losses, so they have no incentive to think critically and strategically [about dealing with market conditions] because they’re focused on their members,” he added. “I think their calculus is right because, ultimately, there likely will be some sort of deal where the union is able to bring more concessions against part time workers and technology.”
Bleeding parcel volumes
A government commission earlier this year said Canada Post, which has lost money for seven consecutive years, faces an “existential crisis” unless it overhauls its delivery model. Canada Post was slow to adapt after email reduced the need to send letters and more private couriers entered the market to support the growth in online shopping. The commission and management say changes to outdated regulatory, policy and labor constraints are also needed if Canada Post is to compete against private parcel carriers and remain self-sufficient.
Canada Post has lost $2.7 billion since 2018, while its share of the parcel market has since been halved.
Businesses, with fresh memories of a 32-day strike last year, have increasingly migrated to alternative package carriers such as FleetOptics, UniUni, GLS, FedEx and UPS to insulate themselves from a potential service stoppage, according to industry professionals. Canada Post in late May said the unresolved labor bargaining had resulted in a 65% year-over-year decline in parcel volumes.
Alison Layfield, director of product development at ePost Global, said her customers worry another strike is possible if talks drag out, especially if Canada Post doesn’t return to the bargaining table. CUPW would likely target a strike for the upcoming peak season, when people make online purchases for the holidays and any work stoppage would have the greatest impact on the postal service, she predicted.
There is also increased risk, Layfield added, that Canada Post could implement a preemptive lockout to further limit operational and financial risk.
ePost Global provides international shipping services for U.S. e-commerce sellers.
A recent survey by the Canadian Federation of Independent Business showed that a postal strike could push two in three businesses (63%) to permanently abandon Canada Post.
“We’re calling on the government to prevent another strike from happening by extending the current collective bargaining agreement for the foreseeable future. The government also needs to immediately give Canada Post the full authority to make the major reforms needed to ensure it is financially sustainable,” the CFIB said in a statement on Friday. “This will likely require tough decisions, including back-to-work legislation orders. CFIB is calling on all political parties to support the reforms suggested in the Industrial Inquiry report to allow this important service to continue for the long term.”
Layfield said the highly automated Albert Jackson parcel sort facility, which opened two years ago in Toronto with capacity to handle more than 1 million parcels per day, is virtually empty.
Many shippers are now utilizing six or seven parcel carriers to match the geographic reach of Canada Post, she said.
Canada Post is hinting that it might reduce rates again to attract large parcel shippers, “but I think they have to prove themselves” on transit times before logistics providers will tender significant volumes again, Layfield told FreightWaves. “The longer Canada Post sits back and is unable to make these network changes, the further behind they’re going to get and it’s going to give those alternative carriers more leverage.”
Miller downplayed prospects that Canada Post might lock out workers to force progress on a collective bargaining agreement because the Canadian government is run by the pro-labor Liberal Party, which wants to avoid labor confrontations.
“This is what you could call the negative feedback loop where if you can’t make the changes in the overall enterprise, it deteriorates and begins to fall apart. But if you’re the union, your view is, we don’t want to be the ones who bear the brunt of the change even if privately they would admit that the organization could do with some change,” Miller told FreightWaves. “And ultimately, the government could see Canada Post is too big to fail.”