Washington — The U.S. Postal Service and the American Postal Workers Union AFL-CIO (APWU), reached a tentative four-and-a-half-year contract today. Upon ratification by union membership, which is expected to take place within two months, the agreement will run through May 20, 2015, and affect approximately 205,000 employees.  

“This is a responsible agreement that is in the best interest of our employees, our customers and the future of the Postal Service,” said Postmaster General Patrick R. Donahoe. “The contract will help lay a foundation that is fair to our employees and stakeholders.”

Terms of the new APWU contract set the stage for a more flexible and cost-effective workforce to accommodate America’s changing mailing trends. While requiring union ratification, key components include:   

- Economic provisions that address critical Postal Service needs to control labor costs; and,

- Enhanced workforce flexibility to match workforce with workload.

Reasonable wages and benefits are critical to helping the Postal Service fully meet its financial obligations and remain strong in the future.

The drop in the economy, coupled with the shift to digital communications, has dramatically reduced mail volume. Mail volume peaked at 213 billion pieces in 2006 and plummeted to 170.6 billion in the fiscal year (FY) ended Sept. 30, 2010. Revenues shrank from $72.6 billion in FY2006 to $67.1 billion. The FY2010 net loss was $8.5 billion.  

The Postal Service deals with the challenges of competing with the private sector while continuing to operate under federal regulations and congressional oversight.

Other issues challenge the Postal Service’s future:

- Created in 2006 under stronger economic conditions, the Postal Accountability and Enhancement Act requires the Postal Service, unlike the private or public sector, to prefund retiree health benefits. This equates to an average of $5.5 billion in cash flow every year through 2016, in addition to the $2 billion it annually pays for current retirees. The Postal Service has asked Congress to restructure retiree health benefits payments to “pay-as-you-go,” comparable to what is used by the rest of the federal government and the majority of the private sector.

- According to audits conducted by the Postal Service Office of Inspector General, the Postal Service has been overcharged to its Civil Service Retirement System and Federal Employees Retirement Benefit pension funds by $75 billion and $6.9 billion, respectively.

Negotiations with the National Rural Letter Carriers’ Association (NRLCA) came to an impasse upon the contract’s Nov. 20, 2010, expiration. Absent a negotiated resolution, the parties will continue to follow the current agreement until a third-party determines the outcome of a new contract. Unlike in the private sector, when negotiations come to an impasse, federal employees are not permitted to strike. An arbitrator determines the final outcome and is not legally required to consider the Postal Service’s financial obligations when rendering a decision.

The APWU represents 205,000 employees who work as clerks, mechanics, vehicle drivers, custodians and in some administrative positions. Employees represented by the NRLCA deliver mail in primarily rural and suburban areas. The NRLCA represents 67,000 career employees and 48,000 non-career employees who substitute for career employees on their days off. Employees represented by both unions received more than $20 billion in wages and benefits last year.

Two other unions represent most other postal employees. More than 203,000 employees represented by the National Association of Letter Carriers, AFL-CIO (NALC) deliver mail in metropolitan areas and 48,000 employees represented by the National Postal Mail Handlers Union, AFL-CIO (NPMHU) work in mail processing plants and Post Offices.

The NALC and NPMHU begin negotiations this year approximately 90 days prior to the midnight Nov. 20, 2011 contract expiration date. For additional background information on labor negotiations and the Postal Service’s workforce, please click on these links:  Labor Negotiations and Workforce.

The Postal Service receives no tax dollars for operating expenses, and relies on the sale of postage, products and services to fund its operations.