ABF Freight sues Teamsters (Updated)

The management at Fort Smith-based Arkansas Best Corp. has decided to seek up to $750 million in financial damages from alleged violations of a National Master Freight Agreement (NMFA) by the International Brotherhood of Teamsters and others.

The NMFA, implemented April 1, 2008, was designed to cause equal labor costs and other benefit payments among trucking companies with drivers represented by the Teamsters.

However, YRC Worldwide, the largest less-than-truckload carrier in the U.S., has received three rounds of wage and benefit concessions from the Teamsters, with the most recent announced Monday (Nov. 1) that includes up to $350 million annually through 2013. Previously, the Teamsters voted to approve a 15% pay cut among unionized YRC drivers.

ABF Freight System, the largest subsidiary of Arkansas Best and a less-than-truckload carrier that competes with YRC, has been unable to obtain similar concessions from the Teamsters. In April, ABF and the Teamsters hammered out an deal that included a similar 15% pay cut approved by Teamster drivers for YRC. In attempting to convince drivers to approve the deal, Teamsters officials reported that Arkansas Best was losing about $10 million a month in 2010 and needed the pay cuts to keep from burning through its cash reserves.

But the special pleading did not sway union members. According to the Teamsters, ballots were sent April 30 to about 7,000 active employees and about 1,000 drivers with recall rights. The final count was 3,764 votes against and 2,936 votes for the new contract, representing about 80% of the total members.

The Monday action by Arkansas Best includes a grievance filed under the NMFA and a lawsuit naming the following parties as defendants: the International Brotherhood of Teamsters; the Teamsters National Freight Industry Negotiating Committee; Teamsters Locals 373 (Fort Smith) and 878 (Little Rock), individually and as representatives of a class of all Teamsters Locals that are parties to the NMFA; YRC Inc.; New Penn Motor Express Inc.; USF Holland Inc.; and Trucking Management, Inc.

The lawsuit was filed in the U.S. District Court, Western District of Arkansas. (Copies of the grievance and lawsuit, and more details on each, can be found at this link.)

“It is ABF’s firm belief that the three rounds of concessions granted to YRC – with the latest deal just ratified last week – by the IBT are in violation of the NMFA that has been in effect since April 2008,” Wesley Kemp, president and CEO of ABF Freight System, said in a statement.

Updated info: The Teamsters issued this brief statement from Brad Raymond, general counsel for the Teamsters: “After initial review of the ABF lawsuit and grievance, the Teamsters Union finds each of them to be frivolous and without merit. The Teamsters will vigorously defend against the lawsuit and grievance and will withhold further comment until we have thoroughly reviewed the documents.”

In its statement, ABF made the following assertions:
• The defendants violated the NMFA in 2009 and 2010 by entering into concessionary side agreements with YRC Companies to the exclusion of ABF and other companies signatory to the NMFA;

• ABF, with more than 8,000 union employees, asserts in its claims that these concessionary agreements were unlawful, unfair and inconsistent with the plain language, intent and purpose of the NMFA, and that they resulted in a substantial competitive disadvantage for ABF; and,

• ABF, believing that the grievance procedure of the NMFA is fundamentally flawed by reason of conflicts of interest on the part of both labor and employer representatives who normally would be impaneled to hear ABF’s grievance, seeks a legal determination to have the court create an appropriate grievance review committee to hear the grievance and resolve the dispute, or to have the contract amendments benefiting only YRC declared null and void by the court, as required by the NMFA.

In an internal memo, Kemp encouraged employees to not be distracted by the lawsuit.

“This lawsuit will be covered in the media and most likely create considerable chatter in and around our company,” Kemp noted. “Rulings on lawsuits of this nature can take some time. But we cannot let this process distract us from performing our jobs and serving our customers in the exemplary fashion they have come to expect from ABF and from all of you.”

The freight recession that began in fall 2006 has been financially tough on ABF.

Arkansas Best, which employs about 9,500 nationwide, posted a 2009 net income loss of $127.52 million, compared to a $29.168 million gain in 2008. However, the 2009 income loss includes a non-cash accounting charge of $64 million for the impairment of goodwill. Total revenue in 2009 was $1.472 billion, a 19.6% dip from 2008 revenue of $1.833 billion.

Conditions are improving, but much of the improvements have come from deep salary and benefit cuts among non-union employees.

For the first half of 2010, the company posted a  net income loss of $28.836 million, an improvement compared to the $33.521 million net loss in the 2009 period.

The company is set to release third-quarter earnings Wednesday (Nov. 3).