Level the playing field in package delivery industry

There has always been a “wonderland” aspect to Federal Express. It is certainly a great corporate success story, in which one man’s vision rose as a global delivery dynamo in Memphis.

More impressive yet, it has succeeded in an industry littered with other failed express delivery companies.

But there’s more to the story than genius, hard work, and mastery of free markets by FedEx’s leadership.

Because of an unreasonable classification of its Express division employees, FedEx enjoys a permanent competitive advantage, neither earned nor logical, over its main rival, UPS.

Labor relations law that governs the operations of rivals FedEx and UPS is determined by two statutes: the Railway Labor Act (1926) and the National Labor Relations Act (1935).

The RLA covers workers in the railroad and airline industries, while the NLRA governs most other private sector employees. The rights of employees are markedly different under the two laws, and the disparate treatment can be used to FedEx’s advantage.

Under the NLRA, workers can unionize facility by facility and need only a majority of those voting at each workplace to certify a bargaining agent. Work contracts have a finite term, and workers can strike if contract negotiations unfortunately reach an impasse.

The RLA, on the other hand, requires that workers organize system-wide, not by facility, and certification of a bargaining agent requires approval of a majority of all eligible voters, not just those present.

Contracts do not expire, they are just amended. Major disputes must go through lengthy mediation, from which only a federal agency, the National Mediation Board, can release workers to strike.

Because UPS was originally organized as a trucking company, its drivers are governed by the NLRA. UPS has since entered the airline package delivery business, in competition with FedEx.

Thus, FedEx Express drivers, who do the same work as the UPS drivers, have fewer rights because the company was originally organized as an airline.

In other words, the past has been institutionalized at the expense of current reality. Truck drivers, and in fact all employees, should be defined by labor law according to the work that they do, not by corporate history.

FedEx touts the fact that it is routinely considered one of the best companies for which to work. If it truly is a great place to work, FedEx has nothing to fear from the application of the NLRA to its Express division employees.

But, as Lewis Carroll would say, the case of FedEx gets “curiouser and curiouser.” The Fed-Ex Ground division has classified its drivers as independent contractors — despite the fact that the company dictates hours, uniforms, logos and colors, truck specifications, procedures, rules, policies, regulations and standards, and requires that they service only FedEx customers.

In the words of the Mock Turtle, this is “uncommon nonsense.” Independent contractors are thus beyond the rights and benefits of employees. They are made responsible, for example, for all taxes, including both the employer’s and employee’s share of Social Security.

By engaging in these fictions, FedEx frees up a great deal of money to mobilize against the competition that would otherwise go to its employees in the form of wages, unemployment insurance, and benefits. This pool of capital is not available to competitors, who perform the exact same function.

There is currently an effort in Congress to correct this injustice to both FedEx Express drivers and FedEx competitors. Section 806 of the FAA Reauthorization Act, would require that only those employees of express delivery companies who perform airline-specific functions (e.g., pilots and aircraft mechanics) would be covered by the Railway Labor Act. All others would be covered by the National Labor Relations Act.

It is clear to any impartial observer that similar employees at both FedEx and UPS should be governed by the same law.

It is also clear that the changes embodied in the House legislation merely create a level playing field by treating similar employees equally.

In “Through the Looking Glass,” Alice declares, “If I had a world of my own…nothing would be what it is, because everything would be what it isn’t…You see?”

This is essentially the world created by FedEx and its selective application of labor law. Section 806 would return reality and fairness to the regulation of the express delivery business. It deserves to remain in the Senate bill.

Kevin L. Kearns is the president of the U.S. Business and Industry Council.