Hanging in the balance
Shippers urge early talks for U.S. West Coast longshore labor contract.
Contract negotiations between employers and longshoremen on the U.S. East and Gulf coasts were protracted and fractious in 2012-2013, with importers and exporters watching nervously from the sidelines.
Shippers are bracing themselves once again as the International Longshore and Warehouse Union (ILWU), which represents dockworkers on the West Coast, prepares to negotiate a new labor agreement with employers represented by the Pacific Maritime Association (PMA). Their current six-year contract expires on June 30, 2014.
Shippers using the West Coast “are very aware of the timeframe for the expiration of the current contract and the anticipation is that the costs are going to begin in earnest fairly early in the New Year,” said Peter Gatti, executive vice president of the National Industrial Transportation League.
He noted shippers don’t serve on the PMA board, and it is only carriers and terminal operators that negotiate the contract.
“From a shipper’s perspective, to whatever extent an increase in costs can be managed, that is going to be extremely important for all goods moving through those gateways,” Gatti said.
“We strongly encourage the ILWU and PMA to start negotiating their new contract as early as possible in order to achieve a quick resolution,” said Jon Gold, vice president of supply chain and customs policy at the National Retail Federation. “NRF’s members are already talking about the upcoming negotiations and are starting to put together potential contingency plans in order to avoid any kind of disruption.
“The continuing uncertainty from the East Coast negotiations wreaked havoc on supply chains for both importers and exporters with multiple threats of shutdowns,” Gold added. “The West Coast ports cannot afford to go through a similar situation. We know there will be tough issues for both sides, but hope they can reach a deal in advance of the contract expiring.”
“Retailers are well aware of the impact the upcoming contract negotiations could have on their global supply chains. Historically speaking, the seemingly perpetual threat of labor strife at American ports has driven retailers to build robust contingency plans that can be employed quickly,” said Kelly Kolb, vice president of government affairs at the Retail Industry Leaders Association. “Although we hope that an amicable agreement between both parties can be reached before June 2014, retailers have learned that they must be prepared for all possible outcomes.”
The contract talks between the International Longshoremen’s Association (ILA) and the U.S. Maritime Alliance (USMX), the group that represents employers in the East and Gulf coast ports, were punctuated with harsh words and negotiations falling apart several times.
With the help of a federal mediator, the two sides were able to extend talks and reach a coast-wide agreement that was approved by union members and employers in April, more than six months after the contract expired on Sept. 30, 2012.
And the local contract in Hampton Roads was not approved until August and negotiations with some ILA contracts were still ongoing.
Staking Territory. Despite shipper hopes that talks will begin in early 2014, some ILWU employers don’t expect bargaining between the PMA and union to start in earnest until late spring of next year.
But the employers and union are already beginning to talk about the upcoming negotiations.
Robert McEllrath, ILWU’s international president, steeled his members for the upcoming negotiations in a column of the union’s newspaper Dispatcher, stating “As we prepare for negotiations next spring, the employers have been watching and testing us.”
He told his members that problems they are having with PMA “over delays and denials of our healthcare bills is like a qualifying round for a heavyweight fight. It’s just one more test to see if we’re in shape for the main event next summer.”
Speaking on a panel held by the Pacific Transportation Association in July, James McKenna, PMA president, said he expected negotiations to be less contentious than in 2008 or 2002 when a 10-day lockout caused hundreds of ships to go unworked.
But according to an account in the Journal of Commerce, McKenna said he expected “long, hard negotiations.”
On the positive side, McKenna wrote in PMA’s annual report earlier this year “While the PMA and ILWU continue to have a positive working relationship, we need to work together to keep our ports competitive. It is essential that we work smartly, and well, to prepare ourselves for the changes coming in the years ahead.”
Referencing the ILA-USMX negotiations, PMA further noted their conflict focused “on issues similar to the ones PMA and ILWU addressed, with great difficulty, a decade ago. In many ways, the East Coast conflict underscores the accomplishments of the PMA and the ILWU over the last decade. Most notably, we reached an historic agreement on a technology framework that has led the way to modernize West Coast terminals in a manner that significantly improved the customer experience and resulted in greater reliability and predictability on the waterfront.”
McEllrath, however, hasn’t shied away from using strong language to rally his members.
In his newspaper column, he told members “The corporations we’re fighting now are bigger and more powerful than ever. They sense that most unions are getting smaller, weaker and more isolated than we’ve been in almost a century. Weaker unions mean employers have a freer hand to do what they want to the working class. The result is corporate greed that’s gotten out of control — from Wall Street to the waterfront.”
He recounted successful efforts by the ILWU to organize workers in 2010 at the Rio Tinto mine in Boron, Calif. (where the “20 Mule Team Borax” originates); in 2011 at a Rite Aid warehouse in Lancaster, Ca.; and in 2012 at EGT, an export grain terminal in Longview, Wash., on the Columbia River jointly owned by the U.S.-based grain company Bunge, Japanese grain and food marketing company ITOCHU, and Korean shipping company STX Pan Ocean.
“The battle in Longview against EGT was our first major waterfront challenge in decades,” McEllrath told his members. “It may have seemed different because the dispute was with grain companies who weren’t part of the longshore contract, but it was seen by everyone — especially employers — as another test of our ability to fight powerful corporations and another union, the Operating Engineers, who crossed our picket line.
“Members rose to the challenge and won a contract that protects ILWU jurisdiction. Through unity, the ILWU prevailed,” he said.
McEllrath himself took part in the demonstrations at Longview. He was one of the protesters arrested, fined $500, and sentenced to spend a day in jail after being convicted on a misdemeanor charge.
He warned other grain companies, Mitsui-United Grain and Marubeni-Columbia Grain, have “decided to pile-on and test us again.”
A dispute with Filipino terminal company International Container Terminal Services Inc. (ICTSI) over its decision to have monitoring refrigerated containers at its terminal in Portland, Ore., performed by members of the International Brotherhood of Electrical Workers (IBEW) is “testing our resolve to protect ILWU jurisdiction,” McEllrath added.
In late August, an administrative law judge held the ILWU was not legally entitled to the work, but Leal Sundet, an ILWU coast committeeman in San Francisco, said he relied on a now-vacated decision by the National Labor Relations Board and predicted a court reversal allowing the ILWU to secure the work.
American Shipper was unable to interview either McEllrath or McKenna for this story, but sources on both sides expect several issues to dominate the ILWU -PMA negotiations.
Pay And Benefits. Management sources say they don’t expect pay increases to be a major sticking point in the negotiations, but the fast rising cost of health and welfare benefits may be, as many ILWU members are unhappy with their health care plan.
As of December 2012, PMA members employed nearly 14,000 registered longshore, clerk and foreman workers at 29 West Coast ports in California, Oregon and Washington, and thousands more “casual” workers. PMA said average full-time wages for fully registered workers top $142,000 annually. For longshoremen it was $132,946; for clerks, $149,800; for foremen or “walking bosses,” $206,675.
PMA said ILWU members “pay no healthcare premiums and receive 100 percent coverage for standard medical benefits.”
But a switch in the health plan administrator from CIGNA to Zenith American Solutions and increased scrutiny of payments has upset many ILWU members. Union members say there has been slower reimbursement to some healthcare providers, and that has upset union members who, for example, must deal with doctors or hospitals complaining about not getting paid.
The Long Beach Post reported hundreds of longshoremen demonstrated in front of PMA’s offices in April and July over the issue.
In addition, reportedly the new administrator is finding some claims that were previously being paid should not have, because procedures were not covered or properly coded.
One management source said these issues did not appear to be a deliberate effort by union members to mislead insurers or employers, but now benefits that had traditionally been provided are not. They said arbitration around the issue is underway.
PMA’s annual report said total benefits costs for the industry were $1.29 billion for the fiscal year, ending June 30, 2012, up 242 percent since 2002, while the cost per active participant was $93,212 over the same period, up 159 percent.
Jurisdiction. The ILWU’s claim of jurisdiction over waterfront work is another significant issue.
The union “wants to grow jurisdiction where they can to offset jobs that might be displaced by technology,” said one employer, who agreed to speak on background.
The 2008 memorandum of understanding between the ILWU and PMA has a clause in which they “recognize robotics and other technologies will replace a certain number of equipment operators and other traditional longshore classifications.” The agreement sought expanded work opportunities for longshoremen, for example on “maintenance and repair of all present and forthcoming stevedore cargo handling equipment.”
In 2008, the PMA and ILWU agreed equipment vendors can perform work under warranty for a maximum of three years. While there can be some exceptions, a letter of understanding on maintenance and repair said “There shall be no gimmicking by the parties related to manufacturers’ warranties.” Employers are also to familiarize ILWU mechanics with operation and repair of new equipment under warranty and system updates and have ILWU members participate in certification programs.
The ILWU believes its future is in maintenance of equipment, and even computer systems, one executive said.
Some other unions perform maintenance work on equipment at terminals, which could bring the ILWU into conflict with them. And work having to do with software, for example, is often not done by union members at all.
“I would not be in a hurry to get ILWU folks — they haven’t had before unless it was in their core work,” the executive said. “Any kind of jurisdiction expansion that gets into other forms of work is something I would question, whether they are qualified to do it.”
While jurisdiction is a hot-button issue, it remains to be seen whether it will be a major one during contract negotiations, the executive said. He noted there is language in the current contract to deal with such issues, and said these sorts of complex questions are often best decided through arbitration.
The ILWU has had success in some cases. For example, plugging and unplugging refrigerated containers on board ships used to be done by a vessel’s crew. But several years ago, the ILWU was able to obtain this work through arbitration.
McEllrath devoted considerable attention to jurisdiction disputes in his Dispatcher column, complaining members of both the IBEW and American Federation of State, County, and Municipal Employees have crossed ILWU picket lines and are working at the Mitsui-United grain terminal in Vancouver, Wash.
When the ILWU tried to have the IBEW condemned at a Washington State Labor Council Convention, the issue was tabled.
At the end of August, just days before Labor Day, the ILWU took the extraordinary step of disaffiliating from the AFL-CIO, with McEllrath citing a “growing surge of attacks” from other AFL-CIO unions.
Automation. The 2002 and 2008 PMA-ILWU contracts addressed automation, and one employer said while it’s unlikely for there to be any effort to negotiate the automation part of the contract, “I think there is going to be more of an effort toward what the compensation is if somebody is displaced because of technology.”
He noted both OOCL with its Middle Harbor project in Long Beach and TraPac in Los Angeles are building highly automated facilities and other terminal operators are working on similar plans.
It’s not clear how many jobs automation will displace, since much of this depends on the cargo growth outlook in coming years.
Peter Hall, a professor of urban studies and geography at Simon Fraser University in Vancouver, British Columbia, also said since 2002 the ILWU and PMA set up their framework for dealing with technology, companies found out that rolling out technology took longer than expected.
“Perhaps by the middle of next year there will be a general understanding of the Middle Harbor and a general understanding about what that is going to due to employment levels and job descriptions, but I would not bet on it. So on the employer’s side there is going to be a sense of ‘let’s get a deal’ and because there are uncertainties,” he said.
“From the union side, McEllrath despite all the noise and the arrest at the grain terminals, he has shown to be someone who makes deals,” Hall added.
Terminal executives say it seems likely there will be some consolidation of terminal work both because the new highly automated terminals will be able to efficiently handle much larger volumes of cargo and some companies are likely to want to consolidate their facilities or get out of the terminal business altogether.
One of these executives pointed to the Port of Oakland where the former Matson Terminal was closed and terminal operator SSA has taken over the work done there, combining it and the work of three other terminals into a single facility.
In the past, many carriers on the West Coast wanted to lease their own facilities, but “the cost of having your own terminal is such that it’s prohibitive given the problems in the carrier world. So I think you’ll see things change and it be about consolidation and about economies of scale and more efficiencies,” a shipping executive said.
“The best place to look at that is in the P3 model that Maersk, CMA-CGM and MSC have agreed to. I think that that will cause changes in the industry that everybody is still trying to figure out,” the executive told American Shipper. “It was a surprise when they announced it, and I’ve had carriers tell me that 70 percent of their staff are working on what their response is” to the P3.
Chassis. As during the contract negotiations between the ILA and employers on the East Coast, chassis maintenance is expected to be a big topic of discussion.
The ILWU-PMA contract says it applies “to the maintenance and repair of containers of any kind and of chassis, and the movement incidental to such maintenance and repair.”
But most shipping lines are gradually divesting themselves of their chassis fleets, selling them to leasing companies, trucking firms, and investment companies to free up capital and reduce liability exposure.
If those new owners say they are not under any obligation to have chassis maintenance done by ILWU members, the union would likely view it as a type of “gimmicking,” which causes them to lose work, an executive explained.
While talks are underway about creation of a regional chassis pool in the area around the ports of Los Angeles and Long Beach, some executives expressed doubt it will be in place before a new ILWU-PMA contract is reached because it is such a complex subject and could be a flashpoint.
Other Issues. In late 2012, more than 600 Office Clerical Unit (OCU) members of the ILWU’s Local 63 staged a week-long strike.
OCU members perform clerical work for line carriers, and bargain not with the PMA but with a group called the Harbor Employers Association (HEA).
OCU picket lines were honored by other members of the ILWU who actually work on the terminals and that allowed the union to shut down many terminals in the ports of Los Angeles and Long Beach.
McEllrath said the “ILWU longshore contract still allows us to respect another union’s bona-fide picket line,” something that he explained is “a fundamental principle that can’t be compromised.
“Over the years, employers have approached the ILWU many times with schemes to reward us for giving up our picket line language,” he said. “The ILWU’s answer has always been ‘no’ — but more colorful language has sometimes been used to make our point clear.”
Employers say there has been some discussion in the past about having OCU members covered by the same contract as the ILWU workers on the docks so that employers do not face the possibility of strikes from two different ILWU units, but they say that seems unlikely to happen.
PMA said the OCU strike was particularly unwelcome because West Coast ports could face more competition after 2015 when the new locks being built for the Panama Canal open, increasing the size of containerships able to pass through the waterway from about 4,500-5,000 TEUs to 13,000-14,000 TEUs.
After a lockout by management closed ports for 10 days in 2002, some large shippers diversified their supply chains to bring more cargo through both East and West coast ports.
The larger ships that will be able to pass through the expanded Panama Canal will allow more economical transport to East and Gulf coast ports and add more competition for cargo originating in Asia.
Both shipping industry and outside observers that American Shipper spoke with believe it’s unlikely there will be a strike or lockout like the one during the 2002 PMA-ILWU negotiations.
“I’m not going to say it’s going to go smoothly, it never really does. But the issues that we’re talking about are not strike issues that people are going to lose wages over,” said one executive.
“It is a long way off and there are lot of uncertainties between now and the middle of 2014. This far out, my expectation is that there will be a lot of noise and they will reach a settlement,” Simon Fraser University’s Hall said. “They might operate under an extended agreement for a while. But unless someone pushes surprisingly hard I don’t see that there would be an appetite for any sort of disruption.”
The stakes for the shipping industry and U.S. economy to achieve a peacefully negotiated ILWU contract are great.
More than 200 ships were stuck in berth or at anchor among the 29 ports affected by the 2002 work-stoppage after 10 days
A paper by Devin Kelly and Jon Agnone of the University of Washington on the 2002 ILWU contract negotiations estimated the overall economic cost of the lockout at the minimum was $2 billion and as high as $10 billion. “Regardless of the exact figure, the lockout had a tremendous impact on thousands of jobs throughout the global logistics and shipping industries, and on the economy as a whole,” they wrote.
While the ILWU also represents dockworkers in Canada, that contract is negotiated with the British Columbia Maritime Employers Association (BCMEA).
In May 2011 and February 2012 BCMEA signed new eight-year contracts with the longshoremen and foremen, respectively. The contracts expire March 31, 2018.
“The eight-year collective agreement has given the opportunity to get off the serial bargaining tread mill and work with the ILWU in a mutually beneficial way,” said Andy Smith, BCMEA’s president and chief executive officer, in the group’s annual report for 2012.
“2012 was the first year ever where there were no job arbitrations or files referred to industry arbitrators. This milestone speaks volumes to the improved working relationship between the employers the BCMEA and the ILWU,” he said.
Militant Heritage. McEllrath noted in his letter to Richard Trumka announcing the ILWU’s decision to quit the AFL-CIO that his union has “a long and proud history of militant independence inside and outside the House of Labor. With roots from the old Wobblies (IWW), our union arose from industrial-based organizing, against the tradition of craft-based unionism, to become a founding member of the Congress of Industrial Organizations (CIO).”
The ILWU’s motto, “An injury to one is an injury to all,” is the same as that of the International Workers of the World.
The ILWU’s pride in its radical past is evident from a perusal of its Website, which includes oral histories of past members, including Harry Bridges, the Australian-born dockworker who helped form the union in the 1930s and acted as its president until 1977.
By contract, terminals are closed on July 5 to mark “Bloody Thursday,” a 1934 skirmish in which hundreds of striking dock workers were arrested and injured and two were shot and killed.
McEllrath noted the union’s affiliation with the CIO “did not last long. During the anti-labor, McCarthy period, the ILWU was kicked out of the CIO for being ‘too red’ and too independent, and we did not join the merged AFL-CIO until 1988.”
Nail ‘Sticking Up.’ The ILWU “occupies a remarkable place in the world supply chains,” said Nelson Lichtenstein, a professor at the University of California, Santa Barbara, and director of its Center for the Study of Work, Labor and Democracy. “It is very self-conscious about itself.”
Longshoremen have “reaped over the last several decades a slice of the enormous productivity gain that came with containerization,” he said. “It wants to retain its position by representing all the workers who perform that function — clerks, whether they are located in San Francisco or longshoremen. That is its great task ahead. The shippers, in general, are looking for some way to get around the ILWU or in some way limit them.
“I don’t think the essential question is whether they are going to get a few more bucks an hour,” Lichtenstein added. “I think it is really a question of all the other nodes of opposition or regulatory or union power in the world supply chain have been decimated.”
The ILWU is “the survivor, the only bit of labor power in the world supply chain found nowhere else. It is vulnerable as a result. It is the nail that is sticking up.”
At The Table. A shipping executive said if the 2008 negotiations are any indication, McEllrath and McKenna will do 98 percent of all the talking during the negotiating sessions. Each man is backed by 20 to 25 people on each side of the table: the PMA Coast Steering Committee of employer representatives and PMA staff on one side and representatives from each of the ILWU unions on the other. The two men bargain, periodically conferring with their members, and often the caucuses go on much longer than the face-to-face talks.
While sitting across the bargaining table from a man who traces his union’s genealogy to “Big Bill” Haywood, Eugene Victor Debs and “Mother Jones,” McEllrath has a “professional approach” when bargaining, and is “someone you can trust,” the executive said. “But when the time and place is there, he’ll do the rant and rave — when he needs it, he uses it.”
Employers familiar with both longshore unions say a difference between the ILA and ILWU is that work for breakbulk and bulk ships plays a bigger role in the affairs of the West Coast union and these union members are paid similar wages as those who do container work.
That’s because unlike on the East and Gulf coasts where there are other unions or non-union facilities that compete with ILA employers, on the West Coast “everything is ILWU and every local from the smallest to the biggest, they’re really tied together,” the executive said.
Several executives told American Shipper they believe McEllrath could be easier to negotiate with than Harold Daggett, the current ILA president, in part because of the existing PMA-ILWU automation agreements.
One executive added that at the bargaining table it would appear McEllrath has absolute control, but that isn’t always the case because some union locals “are pretty independent… if they don’t want to do something it’s going to be very difficult for him to convince the local to agree to it.”
As the negotiations begin, Gatti of the NIT League said shipper groups such as his will contact both sides to try and ascertain how the talks are progressing.
From the 2002 lockout, shippers “learned a lot of lessons from that. If things do not look optimistic, shippers are going to put in so-called plans B or C, look at other options,” Gatti said. “You can’t just turn that on like a light bulb, because once you start making decisions along those lines there are costly repercussions that can result from it.”
“You ask if our members are nervous about the West Coast labor negotiations. Yes they are — and why not? Nothing is worse for an exporter who has foreign customers and severe international competition to serve those customers, than uncertainty,” said Peter Friedmann, executive director of the Agriculture Transportation Coalition.
“To stay in business the exporter must not only have quality product, but must be a dependable supplier. For importers, who face delivery deadlines and penalties, any delay is costly. For the freight forwarders, customs brokers, truckers and others, disruptions and the uncertainly as to when and where they will occur next, can become nightmares,” he said.
“Unfortunately, uncertainty has become all too common over the past year on the West Coast. Every West Coast port has been hit by work stoppages and terminals were closed, sometimes for hours, sometimes for days. In some ports this became a sporadic but frequent event, but in all of the ports there have been several episodes. Some relating to ILWU retirees issues, some relating to the Office Clerks, some relating to closure or shifting of work at the terminals, some relating to jurisdictional issues. The result is that today exporters and importers remain continuously concerned that a disruption of the supply chain could occur at the ports, at any time, with little if any warning,” Friedmann said.
“So, it is natural, looking ahead to the coming nine months of West Coast labor negotiations, that the disruptions and uncertainty of the past 12 months is very much on the mind of the exporters and importers,” he added.