Editors note: This article previously stated the Local 89 air rider contract had been voted down twice and the most recent vote would be the third vote. This was incorrect and Local 89 is voting for the second time on the air rider contract, not the third. Consequently, Local 89 will not be allowed to petition to strike unless this vote is rejected and they reject the next revised contract. The Motley Fool apologizes for and regrets this error.
UPS (NYSE:UPS) ratified its new master labor contract last June, but the company has yet to be able to implement this contract because several local unions have voted against their individual supplement and rider contracts. This story hasn't garnered much attention from the financial media outlets or during UPS earnings releases. For example, in the fourth-quarter conference call UPS management mentioned this very important detail exactly zero times. Don't let the lack of attention fool you, though -- this issue is one UPS investors should pay very close attention to.
The company's unionized workforce is broken down into different voting districts, and those districts vote on the master contract, and certain locales also vote on riders and supplements that need to be approved before the master contract can go into effect. The company has yet to come to an agreement with its Philadelphia, western Pennsylvania, and Louisville locales, but of the three, Louisville is the most crucial to the company.
Louisville, known as UPS's Worldport, serves as the main distribution hub for all of the company's air package delivery. The facility is immensely important to UPS's business, but Local 89, the union in Louisville, has already voted down its local air rider contract once before. The union has now voted a second time, and the votes are to be tallied by April 10. If the contract is voted down, which Local 89 has recommended its members to do, the union and UPS will then have one more chance to come to an agreement and a third vote will be taken. If the contract is not agreed upon after the third vote, then Local 89 has the option to petition for a strike.
In this video, Motley Fool industrial analyst Blake Bos takes a close look at labor relations at UPS. He gives investors key information for what to watch for as this story unfolds, and discusses just how big of an impact a strike in Louisville would have on the company.