All Eyes Focused on U.S. West Coast Ports’ Labor Talks
Contributed by Bruce Carlton, President and CEO of the National Industrial Transportation League
Negotiations have begun on a new longshore labor agreement for every container port on the U.S. west coast from Los Angeles and Long Beach in the south, to Seattle and Tacoma in the north. Talks between the Pacific Maritime Association (PMA), the management group representing all of the container terminal operators, and the single labor union representing longshore labor (the International Longshore and Warehouse Union, or ILWU) began in mid-May. The current labor contract expires at midnight on June 30, 2014.
Shippers everywhere are mindful of the meltdown in container port operations that occurred in 2002 when contract negotiations completely stalled and management exercised its legal right to “lockout” labor from their jobs. The ensuing backlog of ships waiting at berth and out to sea took weeks to cure after a new contract was finally agreed. Relations between management and labor at that time were widely seen as poisonous. Today, most observers are quick to note that the leadership of both parties is respectful and seemingly focused on completing the contract negotiation without rancor or histrionics.
Every transportation media outlet is devoting a lot of attention to these talks, but there is no real news to report. That’s because both parties have agreed to a complete news “blackout” on any details being discussed at the bargaining table. So far both the ILWU and the PMA have honored that blackout—they are not going to negotiate in public. However, in conversations with both management and labor union representatives, NITL has been able to glean the key issues.
The union is heavily focused on job jurisdiction, in addition to normal “bread and butter” matters like wages, benefits, worker safety and pensions for retirees. Following the contracts agreed in 2002 and 2008, where technology and automation issues dominated the talks, many union-represented clerical jobs have transitioned from manual data entry operations to automated, computer-driven tasks. One result of that transition has been a keen focus by the union on protecting its job base for members (even leading to protracted arguments with other unions vying for the same jobs.)
On the management side, the key new issue appears to be a “one off” matter. While naturally focused on controlling the overall cost of longshore labor in their container terminal operations, the PMA is also facing a potentially huge special tax bill associated with the health care insurance plan available to ILWU members and their families. The employer-provided health insurance plan for ILWU members is very generous by any measure—participants pay nothing for full coverage. Under the new health care federal law (the Affordable Care Act, or so-called “Obamacare”) such generous “Cadillac” plans may be subject to a special excise tax. For the PMA that tax has been estimated as high as $150 million. Resolving which side will pay this tax, or what portion they will pay, is likely to be a very difficult issue. As the tax is not due for several years, many believe the new contract may run for only three years versus the six year term of the last two contracts. Shippers, terminal operators and others are eager for a long term settlement to bring certainty to operations in the more than 20 affected ports.
Will there be a new contract in place on July 1st? Probably not, and some shippers have been executing workarounds in their supply chains, directing cargo to east and gulf coast ports, advancing orders, building inventory cushions, etc. However we continue to believe that serious interruptions in port operations are not likely this time around—perhaps some slowdowns, some informational picketing, midday union meetings, and the like. The key negotiators are giving every signal they will stay at the table to reach agreement. A lot rides on their efforts, and NITL will keep members fully apprised of developments.
