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Arbitrator Brent Rules on Subcontracting of Kansas City Surface Transfer Center (STC)

We are extremely pleased to announce that the NPMHU has prevailed in National arbitration concerning the Postal Service’s decision to subcontract Mail Handler work at the Kansas City Surface Transportation Center or STC. A copy of the decision is attached. The award also should apply to several other STCs that have been subcontracted, and favorably interprets several prior National awards under Article 32 and related contract provisions.

This case began in August 2019, when the Postal Service first notified the NPMHU at the National level that the Postal Service had decided to subcontract all mail handler work at the Kansas City STC, scheduled for opening and staffing in September 2019. The National Union initiated a grievance at the Step 4 or National level, followed by additional grievances during subsequent months arising from similar situations in Chicago, Orlando, Atlanta, Washington DC, New Jersey, Massachusetts, Southern California, and Northern California.

Six days of hearings were held ending in October 2021, during which the NPMHU argued that the USPS action was a blatant violation of Article 32 of the parties’ National Agreement, as well as a violation of the Memorandum of Understanding Re Article 32 that has appeared in all National Agreements since 2013. Specifically, the Union argued that both Article 32.1B of the National Agreement and the MOU re Article 32 provide for advance notice and discussions with the Union while the Postal Service is “developing the initial Comparative Analysis Report.” We also argued that the Postal Service is required, among other things, to consider the views of the Union before making its subcontracting decision, to respond to the Union’s views in its decisional document, and to not make any final decisions on contracting out work prior to discussing the matter with the Union. Serving as witnesses for the NPMHU were Chris Bentley, President of Local 297 covering Kansas and Western Missouri; Teresa Harmon, Manager of the National CAD; and Paul Hogrogian, National President.

Attempting to excuse these violations of Article 32, the Postal Service claimed that “[n]o significant impact to the bargaining unit is anticipated,” and that therefore Article 32’s procedural and substantive rules did not apply to any decision to subcontract one or more STCs. In the alternative, USPS also claimed that its decisions in Kansas City and elsewhere were eminently reasonable.

Each of the USPS management arguments were soundly rejected by National Arbitrator Daniel Brent. As a summary of his award, Arbitrator Brent stated as follows:

The Postal Service violated the National Agreement by the manner in which the Postal Service implemented the subcontracting of the Kansas City, Kansas STC. The Union’s grievance is sustained.

The Employer failed to provide the Union with an opportunity, as required by the Article 32 Memorandum of Understanding, to propose different percentages of, or hourly rates for, MHA’s to ensure competitiveness with outside services before the Employer decided to subcontract the Kansas City STC. The Employer also neglected to consider the potential impact of future expansion of the STC network when determining that subcontracting of the Kansas City STC would have no significant impact on the NPMHU bargaining unit.

To reach these conclusions, the National Arbitrator issued a series of interpretations that will prove helpful to Mail Handler representatives and advocates in future subcontracting disputes. Below are some excerpts, although all NPMHU representatives are encouraged to read the entire decision.

Here are some key paragraphs from the Brent Award on the issue of “significant impact” under Article 32 of the National Agreement:

The Employer’s argument that there was no significant impact on the bargaining unit because no current bargaining unit employees lost their jobs or suffered diminished work opportunity due to the Kansas City STC outsourcing ignores the plain language in the Article 32 MOU affording the Union the right to prior notice of impending outsourcing and the right to submit certain proposals before a subcontracting decision is finalized. Simply declaring that the opening of the Kansas City STC would not significantly impact the NPMHU bargaining unit did not change the fact that outsourcing was being considered without giving the Union the opportunity to be heard as explicitly required by the Article 32 MOU.

The Employer’s analysis concluding that no significant impact would be caused by subcontracting the Kansas City STC was based exclusively on the relative percentage paradigm that was used in previous precedential awards issued before the Article 32 MOU appeared in the 2011-2016 contract. The Union asserted that the Employer improperly ignored clear evidence, available when the decision to create the Kansas City STC was made in 2019, that the USPS was continuing its on-going process of building a nationwide network of Surface Transportation Centers in order to cut costs by shifting mail volume away from more expensive air transportation and by consolidating regional loads of mail and packages to maximize trailer efficiency for long distance hauling of mail. The impact of subcontracting much, if not all, of the mail processed by this STC network would be significant for this bargaining unit. Ignoring the possibility of future expansion of the STC network materially impaired the Employer’s Article 32.1B determination of no significant impact.

[T]he Postal Service cannot look myopically at a single facility or solely at a particular point in time when assessing the significant impact of subcontracting work to non-bargaining unit workers without also considering the implications if the disputed program were to be expanded significantly. The facts adduced during six arbitration hearings held in the instant case mandate a conclusion that the planners who were evaluating the Kansas City STC in 2019 were aware of a continuing effort by the Postal Service to shift mail volume from air transportation to surface transportation to reduce both costs and environmental impact. Nothing in the record established that the Employer’s executives and consultants who participated in the outsourcing decision regarding the Kansas City STC in 2019 had a reasonable basis to believe that this long-term initiative would end with the Kansas City STC, as using airplanes would likely remain more expensive than ground transportation and nation-wide consolidation of mail and packages into fewer truck loads would remain economically and environmentally desirable. These evaluators were also aware that expiring outsourced contracts of four previously outsourced STC’s had been renewed in 2018, rather than reassigning the work to NPMHU bargaining unit members.

Although no one can predict the future, the ongoing evolution in 2019 and likely future expansion of this national Surface Transportation Network as an integral component of mail distribution across the United States should have been considered in assessing whether significant impact would occur under an Article 32.1 B analysis.

Other sections of Arbitrator Brent’s decision discuss the separate and independent impact of the MOU Re Article 32 that appears in the NPMHU National Agreement. Here are some key paragraphs from the Brent Award about the Article 32 MOU:

By [also] ignoring the clear language of the Article 32 MOU, the Employer eroded the propriety of its finding of no significant impact.

The Article 32 MOU explicitly creates an independent obligation to consider all relevant factors regarding using MHA’s “whenever contracting-out or in-sourcing is under consideration”. Such obligation expressly provides the Union the opportunity, at its sole discretion, to “propose different hourly rates for such MHAs to ensure competitiveness with outside services.” The Article 32 MOU necessarily mandates prior notice to the Union whenever outsourcing is considered in order to provide the Union the opportunity to propose MHA related modifications. The Employer did not provide such notice.

Whenever outsourcing or in-sourcing is contemplated by the Employer, the Article 32 MOU guarantees the Union the opportunity to propose using more MHA’s or implementing different MHA hourly rates in order to increase the competitiveness of NPMHU bargaining unit employees before the Employer conducts its analysis of the five Article 32.1A factors that must be considered in all subcontracting decisions.

These sophisticated parties have a long bargaining relationship. By incorporating the Article 32 MOU into the collective bargaining agreement, the parties augmented Article 32 and created a changed circumstance that cannot be disregarded. To hold otherwise would negate the bargain reached by the parties through the process under which the Article 32 MOU became an integral component of the parties’ collectively negotiated agreements.

In short, this Brent Award should help to restrict or even end the USPS practice of subcontracting Mail Handler work to private employers without first considering the views of the Union on all issues properly presented.

The Brent Award remanded the issue of remedy to the National parties, meaning that the remedial portion of this Award and its impact on subcontracting at the STC in Kansas City, and in other locations, is still to be determined.

Please do not hesitate to contact the National Office should you have any questions.

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