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FedEx closely watching key legislation

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The fate of one of the largest employers in region may hang on the whims of Congress.

The U.S. Senate next week is likely to resume debate on a measure that could place some of FedEx Corp.’s air cargo business under the National Labor Relations Act, like that of employees at arch-rival UPS.

If UPS and the Teamsters union are successful in getting Congress to sign on, FedEx would lose a key advantage over UPS: curbs on the ability of union locals to strike and cause system-wide service disruptions.

Currently, FedEx Express workers are covered under the Railway Labor Act, which was extended to airlines in 1936 and essentially prevents a labor dispute in one part of a broader transportation system from bringing that system to a halt.

Indianapolis is FedEx’s No. 2 U.S. air hub and employs about 4,500 at Indianapolis International Airport, where it operates over 80 flights a day.

FedEx will stop investing in its Express air unit if Congress shifts its employee status to the National Labor Relations Act, company chairman and CEO Fred Smith warned this week while buttonholing in Washington, D.C.

Smith said it no longer would be prudent to invest $2 billion annually in a business vulnerable to local labor disputes.

 He declined to say whether FedEx would lay off workers of otherwise gut or sell the air unit if Congress rules unfavorably.

UPS officials have argued that FedEx’s labor status gives it an unfair advantage over UPS, which was hit hard by a 15-day strike in 1997.

FedEx counters that it was not until the 1980s that UPS launched its air business and that most UPS cargo is still moved by truck. The majority of FedEx’s cargo moves by plane, thus making the company’s employees more appropriately categorized under the Railway Labor Act, the Memphis-based company contends.

The Senate began debating the issue, which is included under the FAA authorization bill, on Wednesday afternoon. The House version is favorable to UPS and the Teamsters.
 
 

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  • Suit
    "FedEx will stop investing in its Express air unit if Congress shifts its employee status to the National Labor Relations Act, company chairman and CEO Fred Smith warned this week while buttonholing in Washington, D.C."

    Sounds like a prime candidate for a derivative suit if the law passes and Smith follows through with his promise.
  • Congressional Union
    See what happens when the Supreme Court allows unlimited political contributions by organized labor. We might as well assign a local union number to Congress as they walk in lock-step to organized labor. What happened to free enterprise and free markets?

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  1. Apologies for the wall of text. I promise I had this nicely formatted in paragraphs in Notepad before pasting here.

  2. I believe that is incorrect Sir, the people's tax-dollars are NOT paying for the companies investment. Without the tax-break the company would be paying an ADDITIONAL $11.1 million in taxes ON TOP of their $22.5 Million investment (Building + IT), for a total of $33.6M or a 50% tax rate. Also, the article does not specify what the total taxes were BEFORE the break. Usually such a corporate tax-break is a 'discount' not a 100% wavier of tax obligations. For sake of example lets say the original taxes added up to $30M over 10 years. $12.5M, New Building $10.0M, IT infrastructure $30.0M, Total Taxes (Example Number) == $52.5M ININ's Cost - $1.8M /10 years, Tax Break (Building) - $0.75M /10 years, Tax Break (IT Infrastructure) - $8.6M /2 years, Tax Breaks (against Hiring Commitment: 430 new jobs /2 years) == 11.5M Possible tax breaks. ININ TOTAL COST: $41M Even if you assume a 100% break, change the '30.0M' to '11.5M' and you can see the Company will be paying a minimum of $22.5, out-of-pocket for their capital-investment - NOT the tax-payers. Also note, much of this money is being spent locally in Indiana and it is creating 430 jobs in your city. I admit I'm a little unclear which tax-breaks are allocated to exactly which expenses. Clearly this is all oversimplified but I think we have both made our points! :) Sorry for the long post.

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