Small businesses at risk as Canada Post workers prepare to strike

Shippers and residents in Canada are bracing for another strike by postal workers scheduled for Friday, which would stop mail and parcel delivery during a period of economic uncertainty marked by tariff disputes with the United States.

The Canadian Union of Postal Workers (CUPW) has announced 55,000 workers intend to walk off the job Friday after 17 months of negotiations with Canada Post failed to produce a new labor contract. The step was taken in part, it said, because the employer indicated it may unilaterally change work conditions and suspend employee benefits.

Mail carriers represented by the union were on strike for nearly five weeks late last year, during which time mail and parcels were not processed or delivered, and post offices were closed. The minister of labor intervened and ordered union members back to work on Dec. 17, with terms of the existing collective bargaining agreement extended until May 22, while a commission assessed the labor dispute and challenges facing Canada Post. 

Workers have been working under an expired contract since the end of 2023.

Canada Post said that in the event of a national disruption, mail and parcels will not be delivered and no new items will be accepted. If CUPW initiates rotating strike activity, Canada Post intends to continue delivering in unaffected areas.

Key issues in dispute include weekend delivery, pensions and wages. The CUPW is also demanding that facility cleaning staff and other contracted support services become permanent Canada Post employees. 

“Last year’s postal strike came at a brutal time, just ahead of the holiday season, and cost small companies over CA$1 billion [$716.5 million] in lost revenue and sales. More than three-quarters of small business owners rely on Canada Post services to do business,” the Canadian Federation of Independent Business said in a statement last week. “If no deal is reached between Canada Post and its union and strike action takes place, the impact on small business will be significant. We are at a critical time for the country with small businesses grappling with massive uncertainty created by trade tensions with the United States and China. Small business confidence in the economy is at a near historic low.

“We cannot afford another threat to our economic stability, and we can’t keep finding ourselves back in the same spot with an unreliable supply chain and an important service again not being available to small firms. Canada Post needs major reforms to its business model, and we need to find better ways to resolve major labour disputes,” the trade association said.

UPS recently added a surge fee for all shipments from the United States to Canada and informed customers that the commitment time for domestic and international deliveries has been increased by 90 minutes, effective Tuesday, because of increased volumes as shippers divert parcels to alternative carriers. The fees range from 49 cents to $1.25 per pound, depending on the service. Supply Chain Dive first reported the UPS charges. 

“We are proud to have provided outstanding service to the Canadian market during the last Canada Post strike in late 2024. We took on hundreds of thousands of new packages to help businesses in Canada deliver for their customers. While managing unprecedented volume levels, we maintained our own exceptional on time performance and we are ready to do it again now,” UPS Canada said on its website. “Our network is primed and ready for increased volume and to support the logistics needs of businesses and consumers in Canada and around the globe.”

FedEx says it also has contingency plans in place to mitigate potential service impacts from an expected increase in demand related to the planned strike, but there are no details so far. 

In addition to disrupting postal service (with the exception of government financial assistance checks), a strike would deepen Canada Post’s already serious financial problems.

Both sides say the other has refused to budge from original positions.

“CUPW came to the bargaining table prepared to negotiate. We presented meaningful proposals intended to benefit postal workers and strengthen the public post office for generations to come. The Union has been focussed on protecting full-time jobs as well as helping Canada Post meet its needs to expand into weekend parcel deliveries. But many of Canada Post’s demands remain more or less the same as they were prior to our strike, including numerous rollbacks,” the union said in a May 13 statement.

Rescue proposals

Canada Post says the union’s demands are preventing necessary operational modernization and would saddle the government-owned company with more than $2.2 billion in long-term fixed costs over four years when it is already in the red because of erosion in regular mail, competition from private carriers and rising operating costs. 

Mail volume has declined from 5.5 billion letters in 2006 to 2.2 billion in 2023. Canadian households received an average of seven letters per week in 2006, but by last year the figure was down to two. 

In 2024, Canada Post recorded its seventh consecutive annual loss. Since 2018, the company has lost more than $2.2 billion, forcing it to dip into cash reserves and accept $716.5 million in short-term government financing. 

The CUPW proposal calls for wage increases of 19% over four years, including a 9% increase in the first year, while Canada Post has countered with a wage hike of 11.5%, or 12% on a compounded basis. The union is also demanding 10 days of sick leave per year on top of the seven personal days already in the collective bargaining agreement. Canada Post is proposing 13 personal days that can be used for vacation or other paid time off.

Canada Post says it needs a flexible business model to compete in the new environment. That includes basing delivery routes on parcel volumes for each day; the ability to offer weekend, evening and next-day delivery services at affordable rates; and a lighter regulatory hand so it has more autonomy to adapt quickly to the growing e-commerce market.

It has proposed a weekend delivery model using a dedicated part-time workforce as well as dynamic routing, which would allow it to plan and optimize delivery routes based on volumes, delivery addresses and pickup. The union has refused to engage on the issue of dynamic routing, according to Canada Post.

The postal operator said it needs more flexible staffing options that would provide greater opportunity to have work performed at regular rates of pay through the creation of new part-time flex positions with guaranteed hours on weekdays. It also seeks the ability to match staffing levels to fluctuating mail and parcel volumes. 

On Friday, a report by an industrial review commission called Canada Post “effectively insolvent” and recommended major reforms that mostly sided with Canada Post. 

It said the national postal charter should be amended to lower delivery standards to realistic levels, urged the parties to allow for the flexible use of part-time employees and called on the Canadian government to end the moratorium on closing unprofitable rural post offices. Daily door-to-door letter mail delivery for individual addresses should be phased out in favor of community mailboxes, except for businesses.  

And the approval process for letter mail price increases needs to be simpler and faster, the commission said. 

“If implemented, these changes may return Canada Post to some degree of financial sustainability so it can continue the Universal Service Obligation – for both letter mail and parcels – but in a manner that reflects the 2025 realities of disappearing letter mail and a highly competitive parcel delivery environment. The world has changed, and both Canada Post and CUPW must evolve and adapt. Merely tinkering with the status quo is not an option,” wrote Commission Chairman William Kaplan, an arbitration and mediation expert.

The report said Canada Post’s financial situation is mostly attributed to the decline of letter mail caused by digital correspondence, the rise of parcel service by private sector competitors, and work rules under collectively bargained agreements that restrict management freedom, such as assigning existing employees additional work when they have finished their assigned tasks. 

“Canada Post’s share of the parcel business has also declined. The competition is ferocious. The recent labor dispute resulted in a further, measurable, and almost certain permanent desertion of long-standing customers who moved their business elsewhere and who have advised Canada Post that they are never coming back (especially absent long-term collective agreements and the certainty they provide against further labor disruptions, particularly in peak season),” the report said.

It placed most of the blame for the failed labor negotiations on the CUPW, saying union leadership is defending the status quo and seeking best-in class compensation, terms and conditions.

“In these circumstances, insisting – as CUPW does – that existing collective agreement provisions allow for necessary changes such as introduction of weekend parcel delivery and flex arrangements during the week is untrue and unproductive. At a minimum, existing provisions, … are so time consuming and have so many conditions, fetters, and guardrails, to make them manifestly unsuitable and, more importantly, unworkable in addressing current challenges,” Kaplan said in the report.

He also shot down the CUPW’s ideas for Canada Post to add business lines such as postal banking, checking in on seniors, establishing artisanal markets at post offices and transforming post offices into community social hubs, saying they are “unrealistic” or duplicate services already provided by others. “In my view, given the financial crisis, Canada Post must focus on saving its core business, not on providing new services,” Kaplan said. 

The postal union criticized the commission’s recommendations, saying they amount to service cuts, outsourcing and major rollbacks of provisions in earlier labor agreements. It worried the proposals would undermine job security for full-time workers.

“There is also no guarantee that if these changes are made, Canada Post will increase its parcel business. Canada Post’s proposals have not been fully costed, nor have we been provided with concrete actionable plans,” the CUPW said in a statement. “Any regulatory and service changes must be dealt with in a fully public mandate review. The report categorically rejected our ideas for service expansion as an immediate solution to Canada Post’s financial issue – despite the proven success at revenue generation for many major post offices around the world.”

The union said it has advocated for years to tie stamp pricing to the consumer price index coupled with input costs, adding that failure to do so is part of the reason Canada Post is effectively insolvent.

Shock therapy

Peter Shawn Taylor, senior features editor at C2C Journal, said in a Financial Post essay last week that Canada Post should be privatized so Canadians can get better service and avoid having to bail out the postal service. He called the union “always-unreasonable” in making maximalist demands. 

In February, he went into greater detail about how to prevent a postal system bankruptcy, calling for an end to residential delivery and for selling Canada Post to private investors.

“The secular collapse in Canada Post’s core business of delivering letter mail, exacerbated by an expensive and inflexible labour force and unrealistic service obligations is now producing a steady stream of unsustainable deficits. Unless decisive action is taken, the Crown Corporation risks becoming a permanent ward of the state, sucking up valuable taxpayer resources while providing services that ever-fewer Canadians want or are prepared to pay for,” he wrote in C2C Journal. “And the only realistic solution is an immediate and permanent change to the very concept of Canada Post. Given the experience in Europe and elsewhere, the surest ‘path to viability’ lies in letting the market take over. This means removing the obligations of the federal Postal Charter and harnessing the innovation and creativity of the private sector.”

Click here for more FreightWaves/American Shipper stories by Eric Kulisch.

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