YRC Worldwide Inc. YRCW -13.34% 's union employees on Thursday voted against extending their contract, dealing a major and unexpected blow to a refinancing agreement that would have stabilized the trucking company.
The contract extension, which was defeated by a 61% vote, would have extended the International Brotherhood of Teamsters' agreement with YRC for five years and kept in place pay cuts that workers had agreed to in previous negotiations. The company has said in the past that a contract extension would cement the financing it had lined up to pay off some of its debt that comes due this year.
"Our members have made huge sacrifices to keep this company alive and a majority made the decision not to sacrifice anymore," said Tyson Johnson, director of the Teamsters National Freight Industry Negotiating Committee, which represents about 26,000 workers.
YRC shares slumped 13% to $13.66 in after-hours trading.
The Overland Park, Kan.-based company has about $1.4 billion in debt, much of which is due in the next two years. The company's creditors have said previously that they wouldn't agree to a refinancing unless YRC was able to renegotiate its labor contract to stabilize expenses.
In December, the company said it had secured $300 million in financing from several investment firms, which would allow it to pay off debt maturing in February. That financing was contingent on a contract extension, the company said last month. The company has also been seeking to push back the due date on $124 million of debt due in March 2015.
"While we are disappointed in the outcome of the vote, we believe that timing of events related to our refinancing did not work in our favor. said YRC Worldwide CEO James Welch.
Over the past six years, union workers have accepted pay cuts of 15% and a 75% reduction in pension contributions. The company was asking them to extend those through 2019. Nearly 20,000 employees voted.
The Teamsters for a Democratic Union, a splinter group within the union, issued a statement saying the national leaders "should step up to the plate and bargain immediately with YRCW, while simultaneously dealing with the banks to save Teamster jobs without completely gutting the contract."
YRC's debt burden grew with the 2003 merger of Yellow Corp. and Roadway Corp., which created Yellow Roadway Corp. The company took on more debt when it acquired USF Corp. for $1.37 billion in 2005 to strengthen its regional business. Analysts and industry observers had largely expected the contract to pass because of the number of jobs at stake if the company is unable to refinance its debt.
Write to Laura Stevens at laura.stevens@wsj.com, Tess Stynes at tess.stynes@wsj.com and John Kell at john.kell@wsj.com


Suffolk, Nassau OTB probe ethics conflict
by David Winzelberg
Published: November 24th, 2013

At least one employee of Nassau County Off-Track Betting is questioning whether the head of his employee union, a member-elect of the Suffolk County Legislature, should have a say in Suffolk OTB business.
Teamsters Local 707 President Kevin McCaffery, whose union represents about 200 Nassau OTB workers, was elected earlier this month to serve as a Suffolk legislator representing the 14th District. In a letter last week, Nassau OTB cashier Jackson Leeds alerted the Suffolk County Ethics Board to McCaffery’s possible conflict of interest.
“As a Suffolk County legislator, his duties are to the people of Suffolk County,” Leeds wrote. “He cannot simultaneously represent the interests of employees of Nassau OTB, a Nassau County public benefit corporation.”
McCaffery told LIBN he doesn’t think the two counties’ OTBs are in competition with each other and he doesn’t see his role as union leader for Nassau OTB workers as a conflict with issues surrounding Suffolk OTB.
“If anything, I have the background of dealing with Nassau OTB, which gives me more insight on the subject than any other legislator out there,” McCaffery said.
When asked if the legislator-elect’s union job appeared to be a conflict of interest, Nassau OTB chief Joseph Cairo said, “If you really want to stretch it. But I don’t see anything that’s apparent to me.”
Cairo added that he’ll instruct the Nassau agency’s counsel to review the situation.
Leeds, a 10-year veteran of Nassau OTB, complained that both union officials and county OTB management have been too focused on the 1,000 video lottery terminals planned for each county’s OTB and they’re not paying enough attention to current operations.
“They never worked behind a window,” Leeds told LIBN. “They’re out of touch with the bettors of Nassau County.”
Internet wagering and dwindling handles – the overall money being wagered – have prompted a consolidation in Nassau OTB’s operations in recent years; there were 15 betting offices in Nassau in 2003, and now there are eight. Suffolk OTB, which has seven branch offices, filed for bankruptcy last year.
These days, according to some analysts, OTB offices exist largely for political patronage – another reason, according to Leeds, that the Nassau union chief shouldn’t mix one business with the other.
“Union leaders should not be politicians,” he said. “OTBs are run by politicians. Being political and doing public good aren’t always incompatible, but they often are.”
This isn’t the first time a Long Island legislator’s OTB ties have become an issue.
In May 2000, Gregory Peterson, then-president of the Nassau OTB, sued to prevent Nassau County Leg. Roger Corbin from voting on appointments to the Nassau OTB’s board of directors. Because Corbin was employed as a branch manager for New York City OTB and a member of Teamsters Local 858, which then represented all employees of Nassau OTB, Peterson alleged Corbin’s legislative role posed a conflict of interest.
A New York Supreme Court judge issued an injunction preventing Corbin from voting on OTB appointments, but Corbin appealed and the lower court’s decision was reversed. The Nassau County Board of Ethics also chimed in, determining by a 3-2 vote that voting on OTB appointments didn’t create a conflict because Corbin didn’t influence policy or engage in labor negotiations.
With McCaffery, some observers say it’s best to proceed with caution.
Anthony Figliola, vice president of Uniondale-based government relations firm Empire Government Strategies, said the legislator-elect may want to recuse himself from any votes concerning Suffolk OTB until the Suffolk County Ethics Board offers an opinion.
“OTB is a political football,” Figliola said. “It’s better to stay out of it, especially if you want to get things done in the Legislature.”


David Winzelberg
Reporter
631.913.4247
917.796.1801

David Winzelberg
Real Estate Reporter
(631) 913.4247
david.winzelberg@libn.com