UPS planes at Worldport in Louisville. | Photo by Boris Ladwig

As UPS and its airplane mechanics slog through their fifth year of negotiations, the federal mediators who are trying to get the parties to ink a new deal likely are employing a bit of game theory and psychological moves based on loss aversion.

But the mediators’ strongest ally may simply be the passage of time, a mediation expert told Insider.

The negotiations between UPS and the mechanics union, the Teamsters Local 2727, began in October 2013. They affect about 1,300 employees, including about 550 in Louisville, and play a pivotal role in the operations of one of the logistic giant’s North American hubs.

Union members have said that the company is proposing to increase health insurance costs by such an extent that it would be unaffordable. The company has told Insider that it pays industry-leading wages and its offers have included a no-premium health benefit.

Union members already have voted to strike — but their vote is largely symbolic, because the federal law that governs the negotiations, the Railway Labor Act, prohibits the parties from initiating strikes or lockouts without permission from the National Mediation Board, an independent federal government agency that facilitates labor-management relations within the nation’s railroad and airline industries.

The RLA was passed in 1926 and is the oldest collective bargaining statue in the U.S. It was negotiated by railroads and their unions and only later was amended to include airlines, which, at the time of the laws passage, were in their infancy.

Martin Malin

Parties in other industries can initiate strikes or lockouts without NMB approval, but the U.S. Congress established special rules for the railway and airline industries “to avoid disruptions to the economy or to transportation services in a particular … region of the country,” said Martin Malin, professor of law and co-director of the Institute for Law and the Workplace at the Chicago-Kent College of Law.

While other unions, such as autoworkers, and their employers that are covered by the National Labor Relations Act have a duty to merely bargain until they reach an impasse before they can initiate a strike or a lockout, parties in the railroad and airline industries have to make “every reasonable effort to reach an agreement,” Malin said.

“It’s a very prolonged process (with an) emphasis on third-party input,” he said.

Whether that benefits unions or the employers “really depends on the circumstances of a particular case,” Malin said.

Right after the Sept. 11, 2001 terrorist attacks, for example, it helped the United Airlines union, he said. The parties were in the middle of negotiations, and under the NLRA, UA could have declared an impasse and locked out employees at a time that customers were staying away. Under the RLA, however, they continued hemorrhaging millions of dollars per day, which provided a significant incentive for the employer to reach a deal.

Malin said that, in general, mediators do not make judgments about which parties are right or which deals are fair.

“Our job is to try to get a deal,” he said.

Malin has extensive experience in mediation and in 2009 was appointed by President Barack Obama as a member of the Federal Service Impasses Panel, which provides assistance in resolving negotiations between federal agencies and unions that represent their employees. He emphasized, however, that he was not involved in nor familiar with the negotiations between UPS and the Teamsters.

Malin said mediators typically meet with the parties jointly and separately to try to get them past their positions to focus on both their interest and the other party’s interests.

The process can become tricky, he said, especially when the mediators have to mediate not just with the two parties but within each party’s bargaining teams, the members of which may not necessarily agree on all points.

Time also puts pressure on the parties: Workers, for example, may see their salaries frozen for years, which means that their income essentially declines because of inflation. On the other hand, the company may incur ever greater health care costs, while the employees’ portion may remain the same.

Pressures on the company may be particularly intense if health care costs rise quickly and the company wants to make some structural changes to the benefit to get employees to participate in wellness or other programs that reduce costs in the long term, Malin said.

One other motivator for management, he said: Pay increases usually are retroactive — unlike any benefits the company derives — from structural changes to its health care plan, for example.

Sometimes it takes a mediator for the parties to realize that it’s OK to relent on some issues.

“Look at what you’ve accomplished,” a mediator might say, according to Malin. “You’ve gotten this resolved, you’ve gotten that resolved …”

It’s a way to take advantage of people’s loss aversion, which is their tendency to view a loss as more negative than a gain of the same value.

Parties often reach an agreement in the early morning hours after having sat through negotiations for many hours.

“The longer the process continues, the more invested they become,” Malin said.

Boris Ladwig is a reporter with more than 20 years of experience and has won awards from multiple journalism organizations in Indiana and Kentucky for feature series, news, First Amendment/community affairs, nondeadline news, criminal justice, business and investigative reporting. As part of The (Columbus, Indiana) Republic’s staff, he also won the Kent Cooper award, the top honor given by the Associated Press Managing Editors for the best overall news writing in the state. A graduate of Indiana State University, he is a soccer aficionado (Borussia Dortmund and 1. FC Köln), singer and travel enthusiast who has visited countries on five continents. He speaks fluent German, rudimentary French and bits of Spanish, Italian, Khmer and Mandarin.


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